ERISA is the federal law governing employee benefits, like your health insurance. If you get your insurance through your employment, and if you think "insurance" is an enforceable contract that the insurer will cover what it says it will, then you don't have insurance at all -- you only think you do.
As we’ve discussed the Supreme Court will soon consider whether ERISA “insurers” can get away with unilaterally imposing time limits on your ability to start a lawsuit against them when they deny your benefit claim. If you want an example of their breathtaking arrogance, get a load of one of their arguments.
Thanks to the "insurers'" efforts over the years, and the courts’ unfortunate acceptance of their pitches, ERISA claimants have the deck stacked against them when they go to court. As relevant here, their ability to conduct discovery and present their case to a court using the usual sorts of evidence and arguments has been vastly limited if not destroyed. In a word claimants’ rights in that connection have been gutted.
And now ERISA “insurers” are arguing to the Supreme Court that, those rights having been thusly gutted, claimants really don’t need much time at all to get their case into court once their claim has been denied. The American Council of Life Insurers, America’s Health Insurance Plans, and the U.S. Chamber of Commerce, for example, submitted a brief to the Court arguing:
These guys certainly do not lack for chutzpah. Their argument here amounts to: since we've gutted the claimant's ability to conduct discovery or investigation, and reduced their day in court to a judicial rubber stamp, claimants don't need much time at all to don their blindfolds and line up against the wall.
ERISA, in addition to drastically limiting the remedies you might secure in the unlikely event you are able to prevail on a benefits claim in court, imposes strict deadlines for you to act in response to a denied claim. If you fail to keep careful track of the calendar, your claim — regardless of how strong it may be on the merits — could very well perish simply because of the passage of time.
You’ll need to be careful in at least two respects: the time limit for submitting an internal appeal to the ERISA “insurer” who just denied your claim, and the time limit for filing you complaint in court after that. Blow either deadline and you’re out of luck.
1. You must submit the internal appeal within either 60 or 180 days of claim denial
Federal regulations require that ERISA “insurers” give you at least 60 days (in the case of non-health or disability claims, e.g., life or accidental death insurance) or 180 days (in the case of health or disability claims) after a denial to submit an internal appeal — a reconsideration by the “insurer” as to whether it should continue to pay benefits, and thus reduce its profits. Humanitarians that they are, ERISA "insurers" always do the bare minimum, and so the 60- or 180-day minimums are effectively the maximums as well. So, unless your benefit plan is exceedingly rare, you’ll have either 60 or 180 days to get that appeal in.
As we’ve seen, the “insurer” has its own deadlines to respond once your appeal is submitted, with one big difference: if you blow your deadline, you are out of luck, but if the “insurer” blows its deadline … well, everybody makes mistakes, right? Bottom line: the “insurer” can miss its deadline with no meaningful consequence, but if you miss your deadline, game over. So be careful with that deadline.
2. You must file your lawsuit within the statute of limitations – whenever that is
ERISA, model of clarity that it is, doesn’t impose a deadline for filing a lawsuit to try to recover the meager remedies it allows. So, no worries, right?
Wrong. Just because ERISA doesn’t have a deadline doesn’t mean we can’t come up with one anyway, so that claimants who wait too long to file their lawsuit can be unceremoniously ejected from court. So, at the behest of ERISA “insurers,” courts have decided to just borrow a time limit from state law, and apply that, never mind that ERISA doesn’t have a time limit of its own.
OK, so at least we can just check the law of our state to figure out what the deadline is, and then at least we’ll know.
Wrong again. ERISA “insurers” insert time limits into their “insurance” policies, and the courts generally allow this, so your deadline to file your lawsuit is … whatever the “insurer” says it is.
A pending Supreme Court case, Heimeshoff v. Hartford, will decide what the outer limits are on an “insurer’s” ability to just impose its own deadline on your ability to pursue remedies in the federal courts your tax dollars pay for. So we’ll know a bit more about that before too long.
One thing you can count on is that if you miss the deadline, whatever it is, for filing your lawsuit, you are out of luck from the get-go. It’s a deal-breaker. A death-knell. The fat lady singing.
So, it’s important in an ERISA case to pay very close attention to time limits. Miss one by even a day and your claim is over before it starts. Indeed, it never really starts at all.
ERISA is a mess of acomplex and reticulated statute, and so it gets interpreted differently by different courts.
One example I have some familiarity with is what we clever lawyers call “post hoc rationales,” which is what normal people would call “First time I’ve heard of that” or more appropriately “WTF?” It arises when an ERISA “insurer” denies your claim, and then after you sue them, realizes its denial was a big fat lie. So now, finding itself in court, it comes up with another reason, which it never mentioned before you served your lawsuit, why your claim should be denied anyway.
One problem with that: it’s illegal. ERISA itself requires that when an “insurer” denies a claim, it ““shall” provide notice describing “the specific reasons” the claim was denied. Under Labor Department regulations as well, it “shall” provide not only “the specific reason or reasons” for a denial, but “the specific plan provisions on which the determination is based.” The Supreme Court says ERISA “insurers” “must” describe in writing “the specific reasons” for a claim denial. Black & Decker Disability Plan v. Nord, 538 U.S. 822, 830 (2003).
Seems pretty straightforward, no?
Well, it all depends on where you live. The United States Courts of Appeals are divided geographically into circuits, and each circuit applies the law in its own way, pending the Supreme Court coming along and deciding for everyone how it’s to be done. Here, despite the fact the law requires “insurers” to provide “the reasons” and “the specific policy provisions” involved when they deny claims, in many parts of the country that so-called law is simply not enforced.
I had a case where the Eleventh Circuit ruled against my client based on a rationale the “insurer” never mentioned until we were already in court (the reason it cited at the time it denied the claim was, shall we say, not supported by the evidence). So the “insurer’s” utter failure to provide “specific reasons” and “specific policy provisions” when it denied my client’s claim, illegal though it was, made no difference whatsoever: the “insurer” still won.
Had this case been in any number of other circuits, the result would have been precisely opposite. The “insurer” would have been stuck with the reason it provided in the first place, and based on that it would have lost.
So I have asked the Supreme Court to step in and fix this, and establish one rule for the whole country about these after-the-fact rationales. The overwhelming odds are that it will decline to review the case, since that’s what it does in something like 98% of cases presented to it. But you never know.
Here’s the petition for certiorari, discussing how the different circuits apply the rule, and asking for Supreme Court review. Enjoy! /sarcasm
In the meantime, as noted had the Eleventh Circuit applied the rule other circuits apply, the result would have been the opposite. Like George Costanza, the Eleventh Circuit should …
Yesterday we touched on the troubling practice of federal courts remanding ERISA claims to “insurers” for a second try after they had already ruled against them. It’s yet another example of how, when ERISA “insurers” lose in court, they don’t actually lose in court. If their decision is found by a judge to have been incorrect, which you’d think would result in them losing, they win anyway unless the judge goers further to determine their decision was not only wrong but patently absurd. And, in the case of remands, even if the judge decides that they don’t actually lose; they get another bite at the apple to try to come up with a claim denial that’s easier to defend in court next time around.
Lest you think that last comment is some sort of hyperbole, let’s take a look at what Judge William M. Acker of the Northern District of Alabama, probably the lead singer in the Rising Judicial Chorus, had to say about remands in his recent decision in May v. AT&T Integrated Disability (case no. 11-AR-1923-S, 2013 WL 3879895) (July 26, 2013):
“Sophistic,” by that way, is sufficiently applicable to ERISA “insurers” that it ought to be part of their corporate name, something like “Sophistic Mutual ‘Insurance’ Company”: it means “plausible but fallacious,” which is pretty damn close to the high standard required for an “insurer’s” decision to pass inspection under a so-called “abuse of discretion” analysis.
Judge Acker had quite a few other choice remarks about the Sophistic Mutuals of the world and the way the law renders them bulletproof. Here’s a taste:
Or this, discussing how the Eleventh Circuit essentially discounts the very significant conflict of interest under which ERISA “insurers” operate:
And finally, a few choice words about the “abuse of discretion” rule as applied to ERISA “insurers”:
Bruch, you may recall, was the case where the Supreme Court first established this grant-of-discretion / abuse-of-discretion rule, a rule repeatedly abused by “insurers” in the manner described by Judge Acker. And he is quite correct about the due process implications — if only a court would ever take a serious look at them.
A recurring aspect of ERISA’s malignance is the judicial practice of “remanding” a claim to an ERISA “insurer.”
What is a remand? It’s when a judge, after concluding the plaintiff is right and the “insurer” is wrong, sends a claim back to the “insurer” it just got done ruling against for another try — instead of ruling in favor of the claimant, whom he just … ruled in favor of.
I’d sure like that sort of leeway from judges. After (once again) hearing something like this:
It’d be great for a judge to say “so go back and try it again.”
Doesn’t happen. Unless you’re an ERISA “insurer.”
Why on earth would a court, having rejected a party’s legal position, not just issue a judgment based on that ruling, and instead give the losing party a second bite at the apple?
Here’s an explanation (of sorts) from the Sixth Circuit’s recent decision in Fura v. Federal Express Corp. Long Term Disability Plan, (Case no. 12-2062, August 6, 2013) after it discussed at length that Aetna, the ERISA “insurer,” had issued a decision that was so absurd as to be arbitrary and capricious:
Unreasoned explanation? Arbitrary and capricious decision? Utter lack of rationality and good faith in the decision-making process?
The Ninth Circuit today issued its opinion in Stephan v. UNUM, reversing a summary judgment in UNUM’s favor and sending the case back to the district court for further proceedings. Along the way the court described the sort of conduct UNUM has been engaging in, and the manner in which ERISA enables this unlawful behavior:
Numerous courts, including ours, have commented on Unum’s history “ ‘of erroneous and arbitrary benefits denials, bad faith contract misinterpretations, and other unscrupulous tactics,’ ” McCauley v. First Unum Life Ins. Co., 551 F.3d 126, 137 (2d Cir. 2008) (quoting Radford Trust v. First Unum Life Ins. Co., 321 F. Supp. 2d 226, 247 (D. Mass. 2004), rev’d on other grounds, 491 F.3d 21, 25 (1st Cir. 2007)). Indeed, in Saffon, we attributed the trend of state prohibitions on discretionary provisions in insurance contracts to “the cupidity of one particular insurer, Unum-Provident Corp., which boosted its profits by repeatedly denying benefits claims it knew to be valid. Unum-Provident’s internal memos revealed that the company’s senior officers relied on ERISA’s deferential standard of review to avoid detection and liability.” 522 F.3d at 867; see also Radford Trust, 321 F. Supp. 2d at 247 n.20 (collecting cases). Moreover, the CSA [California Settlement Agreement] notes that Unum was subject to “a multistate targeted examination” of its “claims handling practices,” which resulted in a settlement agreement similar to the CSA. And the CSA was the product of investigations by the State of California into Unum’s claims handling practices.
Erroneous and arbitrary benefits denials. Bad faith contract interpretations. Other unscrupulous tactics. Boosting profits by repeatedly denying claims it knew to be valid. All the while relying on ERISA’s deferential standard of review to avoid detection and liability. And these are the people we are supposed to trust because, after all, they are fiduciaries.
Well, it’s been about ten months since I posted something here. I offer no excuses. Indeed, what do I have to apologize for? After all, I have granted myself discretion to decide if or when to post something.
Anyway, to get this thing fired up again, herewith a slightly updated reprise of the Problem:
ERISA is the Employee Retirement Income Security Act, and it is codified in Title 29 of the United States Code, starting with section 1001. It's federal law, enacted in 1974, and it was supposed to protect employees' rights in connection with their pension plans and welfare benefit plans (health, disability, life insurance, that sort of thing). But it doesn't. Quite the contrary.
Way, way to the contrary.
This blog is dedicated to the ERISA problem.
What is that problem? It mainly concerns those welfare benefit plans (ERISA is actually not a bad law with respect to pension plans). Pension plans is what they had in mind when they enacted it -- welfare benefit plans were an afterthought.
And it shows. If your insurance company wrongfully denies your claim, you might figure you can always take them to court. You can do that (usually), but when you get there you'll find things don't make any sense:
If you get your insurance coverage through your employment, then in virtually every case ERISA preempts state law (meaning it cancels it out, eradicates it, takes its place). But, having gutted state law relating to insurance disputes, it fails to provide any reasonable substitute. The remedies it provides (i.e. what you get if you win a lawsuit) are very, very stingy, and in the vast majority of cases a successful claimant is not made whole; not even close. And ERISA severely compromises your ability to secure even the scant remedies it does provide.
1. Remedies. ERISA limits the recovery you might get to the benefits which should have been provided in the first place, and an award on account of attorney fees in the court’s discretion. Example: you have your disability benefits wrongfully denied. As a result, you have no income, your credit rating is trashed, you lose your home and you are driven into bankruptcy. You file your ERISA suit and against the odds, you win. What do you get? The benefits they should have been paying you back when it might have done you some good. That's all (you might -- might -- get something on account of your attorney fees too). The Supreme Court gives us some reason to hope for improvement here, but there's a long way to go.
Punitive or exemplary damages? Bupkis. ERISA does not allow for any recovery on account of these sorts of damages -- none. And this applies even if the insurance company committed outright fraud when it denied your claim. I find it quite difficult to understand why the insurance industry, uniquely among all industries in America, needs to have immunity from liability for fraud if it is to offer its services at a reasonable price. Anyway, this concern goes beyond making people whole; it also directly impacts the behavior of insurance companies.
As of now we have a situation where the law tells insurers they face no meaningful consequences if they deny care improperly or even commit outright fraud. As one federal judge has commented, "if an HMO wrongly denies a participant's claim even in bad faith, the greatest cost it could face is being compelled to cover the procedure, the very cost it would have faced had it acted in good faith. Any rational HMO will recognize that if it acts in good faith, it will pay for far more procedures than if it acts otherwise, and punitive damages, which might otherwise guard against such profiteering, are no obstacle at all." Insurance companies, of course, are not charities, but corporations; their boards are subject to a fiduciary duty to maximize shareholder value. If it is possible to accomplish this by mistreating insureds, and ERISA says there is no meaningful consequence for that, then it follows that's what insurers will do.
The Supreme Court appears poised to strike down the Affordable Care Act. If that happens, then the least we could do is to ensure that those people who are fortunate enough to have insurance at least have some meaningful ability to enforce insurers' promises in court.
But never mind the ACA; ERISA matters a lot anyway. If you get your insurance through your employment, then -- thanks to ERISA -- consider yourself to be uninsured. If by "insurance" you mean something like an enforceable promise by an insurance company that it will pay for what it says it will, what you have doesn't qualify. What you have is a piece of paper saying some company will pay your claim if it feels like it. You don't have insurance at all -- you only think you do.
