ERISA Health Plan Fundamentals
In the employee-benefits context, an Employer sets up a “employee benefit plan”, (“Plan”) usually governed by a federal statute known as the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA (pronounced “eh-rih-suh”), found in Title 29 of the United States Code at 29 U.S.C. §1001 et seq.
A Plan Participant might be the employee, or a spouse or dependent of the employee or a retired former employee. Terminology varies, and the person might be referred to as a Plan Beneficiary, a Plan Member, or several other terms.
Assignment of Healthcare Benefits
The most common type of employee benefit is healthcare coverage for the Employee and possibly the Employee’s family. Normally, by signing an Assignment of Benefits (“AOB”) form at the time of treatment, the Plan Beneficiary (patient) can “assign” (transfer) to their healthcare provider their right to receive payment from the Plan for healthcare treatment the provider furnishes.
Usually, if the Plan Beneficiary (patient) signs an AOB, at the time of treatment the healthcare provider will only require payment of the “patient co-pay” set by the Plan and will bill the Plan for the balance.
Who is covered by an ERISA plan?
Persons who qualify for Plan Benefits normally are the Employee or retired former employee and possibly (depending on the Plan terms) other Plan Beneficiaries such as spouses, dependent children, dependent siblings or dependent parents.
An unusual aspect of ERISA healthcare Benefit Plans is that although they are available through the Employee, the Employee himself/herself might not be a Plan Participant. For instance, an Employee-husband might sign up for Plan healthcare coverage only for his wife but not for himself. By contrast for example, it is virtually unheard of for an ERISA Plan to offer tuition reimbursement or retirement plan contributions for a non-employee spouse.
Even if a Plan does allow for healthcare coverage for persons other than the Employee, additional persons generally are not automatically covered, except sometimes newborns. The Employee normally has to file appropriate forms with the Plan Administrator in advance, identifying the additional persons. Such applicants are not covered until accepted as a Plan Participant by the Plan Administrator.
Termination of Participant’s coverage
ERISA healthcare plans virtually always require a participation payment from the Plan Participant. This is usually done by a payroll deduction of the Employee; however, in certain cases (e.g., dependent student working part-time) the Plan Beneficiary might periodically send the Plan a check instead. If the Plan Participant stops paying the participation amount, the coverage will terminate.
Plan terms usually provide for automatic termination of some or all Plan Benefits when certain other events occur, such as divorce of the Employee (ex-spouse’s benefits terminate), marriage of a dependent Plan Beneficiary, child Plan Beneficiary reaches a certain age, child Plan Beneficiary is no longer a full-time student, or a Plan Beneficiary is no longer declared as a dependent on the Employee’s federal tax return.
COBRA election and retroactive coverage
Specifically with healthcare benefits, if coverage terminates for any reason, the Plan usually must offer the former Plan Participant COBRA (self-paid) coverage for a certain period of time.
COBRA coverage usually must be offered to Plan Participants even if their coverage terminated because the Employee voluntarily quit, was laid off or was fired for cause. The former Plan Participant has a certain amount of time to “elect” whether to accept or decline coverage.
In situations where a former Plan Participant does not have income from new employment, the former Participant often either declines COBRA coverage or simply doesn’t respond.
If the former Plan Participant suddenly has a significant medical problem within the COBRA election period, the Participant can change the election and make the COBRA coverage payment, and coverage will continue retroactively. However, time periods are short and required steps can be complex, so a Provider with a patient in this situation should contact Manziel Law Offices, PLLC promptly to avoid missteps that could result in no coverage.
ERISA Plan Documents
Benefit Plan terms must be described in the Plan documents that establish the Plan and control operation of the Plan. They state how someone becomes a Plan Participant, how someone stops being a Plan Participant, what Plan Benefits are available, and what a Plan Participant has to do to qualify for a particular Plan Benefit.
Summary Plan Description (“SPD”)
ERISA requires that the Plan must provide Plan Participants with a plain-language document describing Plan provisions – a “Summary Plan Description”, often referred to as an SPD.
Entire Plan described
The Plan documents and the SPD describe all Plan terms regarding all Plan Benefits, not just healthcare coverage. So, if the Plan makes retirement contributions, provides for disability, tuition reimbursement, employee discount on purchases, credit union membership, etc., those too would be described in the Plan documents and SPD. It is not unusual for these summaries to exceed 50 pages!
ERISA Plan documents normally state expressly that the Plan documents and the SPD are not a contract between the Employer or the Plan Sponsor or the Plan or the Plan Administrator and Plan Participants.
Third parties such as healthcare providers have no involvement in the drafting, terms or promulgation of the Plan documents or the SPD.