ERISA FAQ

ERISA is a federal statute intended to protect “the interests of participants in employee benefit plans and their beneficiaries” by creating a uniform, nationwide set of standards to govern those plans. ERISA applies to all self-funded employee welfare benefit plans, funds, or programs established for the purpose of providing beneficiaries, through the purchase of insurance or otherwise, medical, surgical, or hospital care or benefits ....”  Especially important to emergency physicians is the fact that ERISA covers essentially all self-funded plans provided by private-sector employers, with limited exceptions. 

To ensure uniformity in the law governing benefits plans, Congress included provisions in ERISA to ensure that it would preempt, or trump, state law.  Unfortunately, health insurers have sometimes taken advantage of ERISA’s broad application and used the statute as both a sword and a shield, invoking ERISA to establish unilateral and unfair payment practices as well as to prevent providers from seeking full payment for their services.

As of February 5, 2021, 33 states have enacted legislation designed to limit a patient’s payment obligation when they are treated by an out-of-network provider. Laws vary state to state with differences in the types of networks, plans, facilities and providers subject to the regulations. But they generally prohibit providers from billing patients for emergency care beyond the allowed cost-sharing amounts under their plans.  Some surprise bill laws, like those in Florida and New York, also contain payment standards intended to ensure that out-of-network providers receive fair compensation from insurers for their services (e.g., 80^th percentile of the FAIR Health database).  Others do not, leaving providers vulnerable to systemic underpayments from insurers. It is possible that states may enact new legislation or modify existing legislation in response to the passage of the No Surprises Act and subsequent regulations.

If ERISA trumps state law, how can states do this? While ERISA regulates employee benefit plans for self-insured employers (the employer takes on the cost risks), states are still permitted to regulate insurance products that are fully insured by the insurance company (i.e. the insurance company takes on the cost risks). Generally, this means that states can still impose certain restrictions on companies that want to conduct insurance business in their states, such as HMOs.  True “self-funded employee health benefit plans,” however, are not considered “insurance” and are not subject to state “surprise bill” laws (although some states, like New York, disagree and have attempted to regulate self-insured plans). Some states have allowed self-insured employers to “opt in” to state laws, and through this mechanism a self-insured ERISA plan can be subject to state laws. 

Courts have interpreted ERISA to prohibit state law claims against payors where a provider seeks to enforce the “right to payment,” but not where a provider challenges the “rate of payment.”  The theory is that a lawsuit seeking to enforce the right to payment – i.e., challenging a claim denial – is really a claim questioning the underlying benefits under the plan, and therefore must be pursued through the payor’s appeals process and then brought as an ERISA action in federal court.  In contrast, where claims are approved but underpaid, seeking additional payment is frequently not viewed by courts as a “claim for benefits” under ERISA because the payor has already acknowledged that benefits are due, but rather only a dispute over how much is owed.  In that case, providers may be able to bring an action in state court, without being bound by the strict appeal deadlines and processes that payors often impose through their health plans.

Some states, like Florida, give providers a right to bring suit against payors in state court who do not meet the minimum payment standards under their “surprise bill” laws.  Nothing prevents providers from simultaneously pursuing ERISA appeals.  Compared to ERISA claims, state law claims are often easier to pursue because they give providers more time to bring claims than they would have to bring an ERISA appeal.

The “Greatest of Three” Rule – part of a federal regulation issued under the PPACA – requires group health plans or health insurers to pay for out-of-network emergency services in an amount at least equal to the greatest of (1) the amount negotiated with in-network providers; (2) an amount calculated using the same method the plan “generally” uses to calculate out-of-network payments, such as the “usual, customary, and reasonable amount,” or (3) the Medicare rate for the emergency services.[1]  The Department of Health and Human Services and the Department of Labor jointly issued this regulation, so it applies both to PPACA plans as well as ERISA plans.[2]

On December 27, 2020, the Consolidated Appropriations Act (CCA) of 2021, which includes the No Surprises Act, was enacted and contains provisions to help protect consumers from surprise bills starting January 1st, 2022.

The legislation applies to ERISA plans, and to fully insured plans that do not have an out of network payment rate set by a state balance billing law, however, there is much to be learned and clarified about the detailed rules of how this legislation will be enacted and enforced.^3,4 At this time, due to ambiguity in the regulations, it is unclear if ERISA plans will be subject to specific state rules about Surprise Medical Billing or that ERISA plans will be subject to the federal rules. As 2022 progresses, there will be inevitable disputes and more clarity as to the process for determining reimbursement rates and settling disputes. 

References:

1. Patient Protections 45 C.F.R. 147.138(b)(3)(i)

Patient Protections 10-1-2010

2. Final rule for Patient Protections Under the Affordable Care Act, 80 Federal Register 72, 192 (2-27-2015)

Final Rule PPACA 2-27-2015

    3. Requirements Related to Surprise Billing; Part I

https://www.federalregister.gov/documents/2021/07/13/2021-14379/requirements-related-to-surprise-billing-part-i 

    4. Requirements Related to Surprise Billing; Part II

https://www.federalregister.gov/documents/2021/10/07/2021-21441/requirements-related-to-surprise-billing-part-ii