Federal lawmakers implemented the Employee Retirement Income Security Act (ERISA) in 1974. In the roughly 50 years since, employers have done a particularly good job informing their workers about how the legislation applies to their retirement accounts. As for how the law applies to employer health plans, not so much.
Although the main thrust of the ERISA was protecting worker rights in relation to their retirement benefits, lawmakers saw fit to also apply certain provisions to employer health plans. The provisions apply to all sorts of private plans, including group health insurance and self-funded plans.
Being that we specialize in administering self-funded plans, we will talk mostly about how the ERISA affects such plans. Just note that what you read in this post generally applies to all private health plans regardless of the form they take.
A Fiduciary Responsibility
A primary tenet on which the ERISA rests is the understanding that plan administrators have a fiduciary responsibility to their subscribers. That responsibility dictates that plan administrators always put subscriber interests first. It makes sense. The primary purpose of any private health plan is to help cover subscriber healthcare costs; it is not to make administrators a ton of money.
This is not to say that plan administrators cannot turn a profit on their services. They can and should. But when having to choose between their own profits and the wellbeing of their subscribers, the subscribers always come first.
ERISA Mandates
Moving on to how the ERISA actually effects self-funded health plans, there are numerous things to consider. A plan administrator’s fiduciary responsibility serves as the foundation. On top of that foundation are numerous mandates designed to protect subscribers and their rights. The mandates include:
1. Coverage and Benefits Disclosure
Employers or their plan administrators are required to fully disclose all details of plan coverage and benefits. They must disclose what is covered and what is not. They must disclose the details of each benefit. In addition, every effort must be made to inform subscribers of coverage and benefits rather than expecting them to go find the information themselves.
2. Full Financial Disclosure
Employers or their administrators are also required to provide full disclosure of all financial aspects of the plan in question. This includes informing subscribers about monthly premiums, copays, deductibles, and any other associated costs.
3. Network and Claim Disclosure
The last item on the disclosure front involves making sure subscribers are fully informed about plan networks and providers. They must also be informed as to how to make claims for reimbursement. If a plan offers out-of-network services, they must also be fully explained in detail.
4. ACA-Compliant Plans
With the passage of the ACA, the ERISA was amended to mandate that employers with 50 or more eligible workers offer their employees ACA-compliant healthcare coverage. That coverage must include a cap on out-of-pocket costs.
5. Pre-Existing Conditions Covered
Lastly, the ERISA mandates (in compliance with the ACA) that all private health plans cover pre-existing conditions. There are some minor exceptions here, but there are not many.
The ERISA places additional mandates on self-funded health plans, mandates relating to administration, funding, etc. In the end, it is all about making sure subscribers are getting what they actually pay for and are protected against financial loss by an administrator that would otherwise put a plan in jeopardy by not serving its subscribers’ best interests.
Applying ERISA principles to health plans is arguably one of the most important things Washington has done in the healthcare arena. Whether or not everyone agrees with its mandates is another matter entirely.
