Denied Benefits Under Your Employer’s Group Insurance Plan? You Must Appeal Before Filing Suit.
If you apply for insurance benefits through an employer sponsored plan, there are federal regulations which govern the claim process. Federal law applies because employer sponsored plans are covered under ERISA – the Employee Retirement Income Security Act. One of the most important ERISA regulations is 29 CFR Section 2560.503-1, the ERISA claim regulation. A key part of this regulation requires an employee whose claim is denied insurance benefits to file an appeal.
ERISA Applies to Employer Sponsored Insurance Plans, Including Disability Insurance, Health Insurance and Life Insurance
ERISA applies to any employee benefits offered by private employers (i.e. any employer other than a government entity or church). Originally conceived as a pension protection law, ERISA was expanded during the drafting process to cover nearly all employee benefit plans. Insurance plans are covered under a segment of the law that covers employee welfare plans.
ERISA Requires Appeals
One of the ERISA statutes requires covered benefit plans to provide administrative remedies (appeals) for persons whose claims for benefits have been denied. ERISA Section 503, 29 U.S.C. § 1133(7). ERISA also allows the U.S. Secretary of Labor to create regulations governing these administrative remedies, Section 505, 29 U.S.C. § 1135(8). The Department of Labor did, and the claim regulation is codified at 29 C.F.R. § 2560.503-1.
Why Were Claim Appeals Required Under ERISA?
The legislative history leading up to the final ERISA bill that was passed in 1974 shows that the requirement of administrative claim-resolution procedures was intended by Congress to do the following:
- help reduce the number of frivolous lawsuits under ERISA;
- to promote the consistent treatment of claims for benefits;
- to provide a non-adversarial method of claims settlement; and
- to minimize the costs of claims settlement for all concerned.
The idea was that by requiring plan participants a chance to challenge a claim denial and submit evidence in support of their claim, it would give administrators the chance to correct wrongs without litigation. It was also allow the employee and the administrator the chance to develop a file with all of the evidence that should apply to the claim.
The legal phrase for the claim and appeal process is “administrative remedies.” The concept of requiring an employee to file an appeal, is called “exhaustion of administrative remedies. An early ERISA court decision described requiring employees to appeal as follows:
It would certainly be anomalous if the same good reasons that presumably led Congress and the Secretary to require covered plans to provide administrative remedies for aggrieved claimants did not lead the courts to see that those remedies are regularly used. Moreover, the trustees of covered benefit plans are granted broad fiduciary rights and responsibilities under ERISA, sections 401 through 414, 29 U.S.C. §§ 1101-1114, and implementation of the exhaustion requirement will enhance their ability to expertly and efficiently manage their funds by preventing premature judicial intervention in their decision-making processes. The text of ERISA and the policies underlying that text, far from suggesting that Congress intended to abrogate the exhaustion requirement in the case of suits under ERISA or that sound policy would counsel its abrogation by the courts, suggest just the opposite.
Amato v Bernard, 618 F.2d 559 (9th Cir. 1980).
The Problem: ERISA Appeals Are Far From “Non-Adversarial”
Unfortunately, the 1974 vision of a collaboration between the employee and the plan administrator to find the truth often could not be further from the truth in today’s world of for profit insurance companies. ERISA was passed at a time when many employers self-funded their benefit plans. If plans were insured, it was usually by mutual insurance companies, owned by policyholders, not shareholders looking for a profit.
If you have a disability insurance, health insurance, or life insurance claim denied under your employer’s plan, the odds are that the insurance company that denied the claim will fight to uphold its denial. Think about it: you have to appeal back to the same company that just denied you. Why would one adjuster at the company say that another one was wrong? You have to provide overwhelming evidence to get the insurance company to reverse its decision.
All is not lost though. Reversals do happen, usually when an employee and their ERISA attorney put together good evidence to overcome the insurance company’s reason for denying the claim. Even if the claim is not reversed, it is the chance for the claimant and their ERISA lawyer to “build a record” to file an appeal in court.
Build a Record With All of the Evidence You Would Ever Need in Court
Building a record is the process of putting the evidence you would want a court to review. This is crucial in ERISA cases, because you do not get to add new evidence to support the claim if you have to file a lawsuit to get the ERISA plan administrator reversed. This includes documents like medical records, but it also includes expert reports from doctors, CPAs, vocational rehabilitation experts, and others that will never get to testify in court.
So your takeway is this: you have to appeal, and it is the last chance for you and your attorney to develop evidence to win your case. You will never be allowed to submit more evidence after the appeal, so hiring an experienced ERISA attorney is crucial, because you may miss your chance to win the case in court if you do not put a good appeal together.