While the focus of ERISA is retirement plans, the law created rules and protections for other employee benefits, including group health plans.
“ERISA was enacted in 1974 and established minimum standards for both pension and health care plans,” Neal Schelberg, partner at law firm Proskauer Rose in its Labor and Employment Law Department, tells PLANSPONSOR. For health benefit plans, ERISA created standards for reporting certain plan information to the government and disclosing certain plan information to participants, as well as creating a claims and appeals process, says the New York-based Schelberg, who is also a member of his firm’s Employee Benefits, Executive Compensation and ERISA Litigation Practice Center.
Amy Bergner, managing director, PwC Human Resource Services’ health care practice, explains to PLANSPONSOR, “What ERISA basically does is to govern the way that group health plans are administered, such as how benefit claims and appeals are processed, what employee communications are needed, what these communications look like, how these communications are delivered, and what government filings are required for the health plan.”
Schelberg adds that from the beginning, ERISA has required disclosures to participants, whether they are mandatory ones, such as the requirement to provide participants with summary plan descriptions (SPDs) and other plan documents (see “Your Health Plan Needs a Document, SPD Too”), or permissive ones such as the participant’s right to obtain copies of plan-related documents. Just as with retirement plans, ERISA requires that retirement plan participants be provided SPDs , summaries of material modifications (SMMs), and summary annual reports (SARs).
Also similar to retirement plans, ERISA imposes fiduciary standards of conduct on health plan sponsors and others responsible for the administration of health plans, including: acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them; carrying out their duties prudently; following the plan documents (unless inconsistent with ERISA); holding plan assets (if the plan has any) in trust; and paying only reasonable plan expenses. A Department of Labor publication, “UnderstandingYour Fiduciary Responsibilities Under a Group Health Plan,” offers a good resource for the rules for providing and operating a health plan for employees.
The Evolution of ERISA and Health Benefits
The provisions of ERISA affecting health benefits have changed over the years. The Washington, D.C.-based Bergner says, “ERISA now contains specific benefit mandates affecting employer-provided health care benefits. This is a trend that has been underway for a number of years.”
This expansion of mandates started with the Newborns’ and Mothers’ Health Protection Act of 1996 (for hospital stays following childbirth), says Bergner, followed by other amendments to ERISA such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Women’s Health and Cancer Rights Act of 1998 (for protections for women with breast cancer), and the Mental Health Parity Act of 1996 (and expanded in 2008).
“The Patient Protection and Affordable Care Act of 2010 (ACA) greatly expanded the benefit mandates and requirements that apply to employer-sponsored health benefits,” she adds. The ACA requires employers with more than 50 employees to provide affordable health care benefits to employees or pay a penalty (see “SECOND OPINIONS: Questions About Employer Shared Responsibility Rules”).Schelberg adds that Congress amended ERISA with the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 1985. “The amendments to ERISA regarding health care have expanded responsibilities for employers and given substantially more rights to employees,” says Schelberg. “With COBRA, for example, employees were given the right to continue health care coverage, at their own cost, under the level they enjoyed while employed. This presented its own set of challenges for employers, who then had to administer such coverage and collect premiums.”
The Future of ERISA and Health Benefits
Asked what guidance or amendments may be needed to improve ERISA protections for health care benefits and employees who use them, Bergner says the rules about electronic delivery of health benefit communications need improvement. “The current rules are outdated and should be more flexible to allow employers, health plans and employees to access materials electronically with less red tape.”
Schelberg elaborates, “Currently, the delivery and format of documents is certainly a relevant question, namely as to whether they can be delivered in electronic format, since producing paper copies can be quite expensive for employers. While electronic delivery is appealing to employers for the reason of lower costs, there is a tension there because some employees may not be as technologically savvy as others and may not have easy access to electronic materials.”
He sees this question of electronic delivery as being a key issue for the future, offering employers the advantage of producing plan materials more inexpensively and offering participants the advantages of receiving these materials more quickly and being able to search these documents for needed information.
Integrating the ACA with ERISA and other existing regulations is another issue Schelberg sees developing in the future. “Before the ACA, there was a patchwork of regulations concerning health care benefits. The challenge of the next few years will be to see how these two elements, ACA and ERISA, dovetail.” For example, he says, with the ACA introducing concepts like health care exchanges and eliminating certain pre-existing condition limitations, there may be a question as to whether older laws such as COBRA have outlived their usefulness.“It’s hard to say with absolute certainty where things are going, since we are in the middle of living it,” says Schelberg. “Only time, case law and regulatory changes will tell.”