ERISA Plan Benefits and Restrictions
ERISA does not require an Employer, Plan Sponsor or a Plan to provide either any particular type of benefits (e.g., retirement) or any particular level of benefits – one Plan might provide for retirement benefits and healthcare benefits for unmarried children under age 25 living in the Employee’s household; another might only provide healthcare coverage for the Employee.
Healthcare Benefit Restrictions
Common Benefit restrictions
Any benefit discussion must consider that all Plans have certain restrictions, which may vary significantly. Restrictions often seen include the following:
- Co-pay – a specific dollar amount the patient pays each time for a particular service
- Co-insurance – This term can be somewhat misleading because it means a percentage not paid by the Plan. “20% co-insurance” means the Plan only pays 80% of the total amount owed.
- In-network Annual Deductible – The Plan doesn’t pay for services from Healthcare Providers that have a managed-care contract with the Plan until the patient has paid this much for services from contracted providers.
- Out-of-network Annual Deductible – The Plan doesn’t pay for services from Healthcare Providers that do not have a managed-care contract with the Plan until the patient has paid this much for services from non-contracted providers.
- In-network out-of-pocket Maximum – This is a cap on co-insurance. Once the Plan Participant has paid the out-of-pocket maximum for contracted Providers, the Plan pays 100%.
- Out-of-network out-of-pocket Maximum – This is a cap on co-insurance. Once the Plan Participant has paid the out-of-pocket maximum for non-contracted Providers, the Plan pays 100%.
- Annual Maximum – A maximum number of visits or tests or dollar amount for particular services that the Plan will pay each year.
- Lifetime Maximum – A maximum number of visits or tests or dollar amount for particular services that the Plan will pay throughout the Plan Participant’s life.
- Preauthorization – Except for Emergency Services, the Plan will only pay for services for which the Provider obtained pre-approval from either the Plan Administrator or the Plan’s TPA.
- Precertification – The terms preauthorization and precertification are used interchangeably and often shortened to “preauth” and “precert”.
- Exclusions – Conditions, services, etc., not covered by the Plan. Services commonly excluded are eyeglasses, bariatric weight-loss surgery, non-corrective cosmetic surgery, on-job injuries, and intentionally self-inflicted injuries not the result of mental illness or psychological, emotional or other behavioral health problems.
- Formulary – Plans now typically have a formulary, a list of prescription drugs the Plan will pay for. Some Plans will only pay for drugs listed on the formulary and others will not pay for a name-brand drug if a generic equivalent is available; others might pay only the generic rate for a name-brand drug if a generic is available.
- Non-covered Services – Any excluded service is a non-covered service, but “non-covered” is broader. A service may not be covered because an annual or lifetime maximum has been reached or because it is covered only if provided by an in-network provider or because a name brand was specified rather than a less expensive generic equivalent.
Satisfaction of monetary restrictions isn’t portable
In-network and out-of-network annual deductibles, in-network and out-of-network out-of-pocket maximums, annual maximums and lifetime maximums only consider services and payments while the Plan Participant is a Covered Person under the Benefit Plan.
So, for instance, if Smith pays $4,000 out of pocket while working for Employer ABC and he changes jobs to Employer XYZ, Plan XYZ will view his situation as $0 spent out of pocket.
Less common Benefit restrictions
Additional restrictions less often seen, may include:
- Second Surgical Opinion – To be covered, the patient must obtain an independent evaluation from a second surgeon.
- Referral required – Specialist care is only covered if the patient’s Primary Care Physician refers the patient to the specialist.
- In-network only – A service is only covered if provided by a contracted Provider.
- Carve-out services – Because the Plan has a special contract, certain services must be obtained only from a particular contracted Provider.
- Exclusive Provider Organization (EPO) – The Plan only pays for services from contracted Providers.
- Subrogation Requirement – Many Plans contain a “right to first monies” requirement in cases where there are multiple payors such as liability insurance.
- Secondary Payor Status – Some Plans automatically make the Plan’s obligation subordinate to any other payor to the extent permitted by law.
ERISA Plan Healthcare Benefits
Multi-Option Health Benefit Plans
Health Benefit Plans often offer Plan Beneficiaries a choice of several healthcare coverage options, e.g. the “Cadillac” plan, the “Mainstream” plan and the Basic plan, each with different costs and Plan Benefits.
Health Plan Benefits for retired Employees
As mentioned, ERISA does not require either a specific type of benefits or a specific level of benefits. Many ERISA Plans do not provide any Plan Benefits for retired Employees. Some Plans allow such persons to choose from the same coverage that is available to current Employees. Other Plans have separate choices available only to retired Employees, generally with lower coverage.
A related question is COBRA coverage. If healthcare coverage terminates for any reason – including retirement – usually the Plan must offer the former Plan Participant COBRA coverage for a certain period of time.
Common Healthcare Benefit Plan options
In multiple-option scenarios, some coverages offered might involve a Participating Provider Organization (PPO) and others an HMO. Some might require the Plan Participant to choose a Primary Care Physician (PCP) and others might not. Some might require referrals from the PCP to a specialist. Others might allow the Plan Member to access specialists directly without first obtaining a referral. Some might cover chiropractic services and others might not.
Normally, a single SPD describes all Plan options and does not state which options a particular Plan Participant has chosen or is eligible for. It also is not unusual that different Plan Beneficiaries in a single family may have different coverage, such as a pregnant woman having the “Cadillac” plan while her teenage child has Basic coverage.
Often, a Plan Beneficiary will switch options from one year to another to have better coverage (more expensive) or to save money, and might not correctly remember their current option. Claim payment problems can arise when a Plan Beneficiary mistakenly or deliberately tells the Provider they come under a particular option when in fact some other option applies.
Payment difficulties can also arise when Plan representatives give the Provider erroneous up front “verification of benefits” information (“VOB”) describing coverage that supposedly is available but in fact other terms apply.
Payment problems can also arise when claims adjustors or Plan Administrators handling a Provider’s payment claim insist on applying annual or lifetime maximums (also called caps), exclusions, stoploss provisions, etc., from a Plan option different than the one actually applicable.
These scenarios can lead to misunderstandings or disagreements between the Plan Beneficiary, the Provider, and the Benefit Plan as to what Plan Benefits are actually available.