ERISA is the acronym for the Employee Retirement Income Security Act of 1974. It was passed as the congressional response to the mammoth pension defaults of the Studabaker-Packard bankruptcy which caused the loss of that company’s pensions supposedly set aside for its employees. As we can see from the Enron scandal and from the bankruptcies currently plaguing the airline industries ERISA’s purpose has largely failed. Unfortunately Congress made ERISA applicable to all employee benefit plans including employer sponsored health insurance, life insurance, and disability insurance benefits. Unfortunately when Congress included those claims under ERISA it did nothing else. Most importantly it enacted no standards nor did it enact any meaningful remedies. The end result was that ERISA remained an empty vessel with respect to health, life and disability insurance benefits for millions of American middle class employees. This left the law to be shaped by the courts. And at that crucial juncture in increasingly conservative times judgeships came more and more to be filled by conservative corporate oriented lawyers who had internalized the values propagated by the corporations they served to the displacement or exclusion of values which focus on the rights and circumstances of ordinary individuals. Step by step advantages which would have favored individual plaintiffs were stripped from ERISA. Soon the possibility of punitive damages or any other form of extracontractual damages against insurance companies who behaved outrageously was eliminated. So to was the possibility of proceeding under more advantageous state laws eliminated.
As thought the curtailment of possible remedies was not enough of a gift to insurance companies (large insurance corporations provide most of non-pension employee benefits through the sale of insurance benefits) the federal courts eliminated the possibility of a jury trial in ERISA cases and in a final blow eliminated the possibility of any trial at all. It is now held in virtually every federal court in the United States, the only court in which ERISA claims are likely to be pursued, that plaintiffs must appeal first to the insurance company who initially denied their claim and then may only appeal to a neutral court on the basis of the administrative record assembled by the insurance company on the other side of the case. The sad bottom line is that insurance companies become the first and most important decision maker in the very claims which seek financial compensation from them. As a practical matter they get to stack the deck of evidence and control what is submitted to the court as evidence. As has been seen in the recent regulatory investigations of Unum Life and UnumProvident companies much of this evidence is provided by doctors and vocational experts who are full time employees of the insurance companies and whose sole purpose is to undermine claims thereby saving the insurer substantial sums of money.
Although insurance companies must provide people contesting the denial of their claims with a “full and fair review” I personally doubt that a full and fair review can ever be provided by any party with a financial stake in the outcome of its own decisions. In fact, much of my current effort is going into research and writing in support of the proposition that the congressional delegation of that degree of decision making authority to financially interested decision makers is unconstitutional. In this political environment that is tough.
For some insight into the way in which insurance companies manipulate the claims process over which they have control click onto the following link to the Multistate Market conduct Examination Report. http://www.state.me.us/pfr/ins/Unum_Multistate_ExamReport.htm As you read it bear in mind that its language is extremely tame because it was issued as regulatory window dressing on the same day and in connection with a settlement agreement UnumProvident Companies reached with insurance regulators to avoid further litigation. http://www.unumprovident.com/settlementagreement/ Of particular interest is the section focusing on areas of concern which in turn centers on the understated misuse of medical professionals who have sold their license to UnumProvident in order to provide rationalizations for the denials of claims.
The news is not all bleak, however. While, as I said before, this area of law is complicated and difficult attorneys who are committed to representing individuals with ERISA claims have formed informal contacts with other specialists on a nationwide basis to develop our own expertise. If we are able to begin helping people with claims at the first denial stage where the insurance company claims representatives have the least sophisticated legal and medical knowledge we are able to gain significant advantages and win cases in significant numbers. Unfortunately, however, nothing in the law requires insurance companies to advise people whose claims they deny of the importance of seeking legal representation so they do not do so, (of course). At that stage people too often trust the insurance companies to be fair. Without representation they lose in overwhelming numbers.
Hopefully change will come but it is doubtful that fairness will be restored anytime soon.
Jon Holder