Is Long-Term Disability Covered by ERISA?
According to a recent report of the Centers for Disease Control and Prevention, 1 in 4 adults in the United States is living with a disability.
Many of the disabilities affecting adults in the United States affect a person’s ability to work.
If you have been living with a disability for more than six months and you’re not of retirement age, it’s important to investigate whether your employer provides coverage under a long-term disability insurance plan. If so, the plan might be a great support option for you until you can get back to work.
Unfortunately, many people find that these plans refuse to provide the promised coverage.
And when the plan administrator denies a claim, how you proceed depends on whether your plan is covered by the Employee Retirement Income Security Act of 1974 (ERISA).
ERISA covers some, but not all, long-term disability plans. It depends on a plan’s features. Knowing which plans are and aren’t covered lets you know how to fight an unfair denial. Read on to learn about your options and rights.
Defining Long-Term Disability
The first step is to see how your plan defines long-term disability. Some plans consider you disabled if you cannot do your current job.
Others follow the Social Security Administration’s (SSA) disability definition, which essentially requires that you can’t do any job in the national economy.
This determination does, however, take into account your age, education, and past work experience.
The SSA also will not find you disabled unless you are unable to work because of a medical condition that is expected to last at least a year.
Frequently, a plan will first offer short-term disability benefits if you are unable to perform your own occupation.
Once you have received short-term disability benefits for a period of time—often six months, but check your specific plan—you become eligible for long-term disability benefits.
Proving you are eligible for long-term disability benefits can be more difficult if your plan requires you to show that you cannot do any job.
For this reason, it’s important to make sure your doctor and other providers understand the difference between short-term and long-term disability.
They will need to provide additional information regarding your ability to do any work. If your physician is overwhelmed by the paperwork required or doesn’t understand what information is needed, an attorney can refer you to a doctor who is more familiar with the process.
Long-Term Disability and ERISA Law Overview
Congress passed ERISA in response to a vast increase in the number of employee benefit plans being offered to employees and the number of instances in which employees were denied anticipated benefits.
Its goal was to require disclosure of information to employees and impose safeguards with respect to the establishment, operation, and administration of such plans.
For disability plans, ERISA regulates:
- How companies process disability benefit claims,
- The timeline for processing a claim, and
- The claimant’s rights if the company denies their disability claim.
The timelines ensure that disability insurance companies don’t inflict harm on claimants by indefinitely delaying their decision on claim eligibility.
If an insurer denies a claim, ERISA provides guidance on the appeal process.
Federal courts continue to interpret ERISA and long-term disability claims, which is why an attorney is in the best position to evaluate denial questions.
Adding to the complexity of this area of law, some states regulate insurance companies in such a way that it impacts how courts review ERISA claims.
Protections for Plan Members Covered by ERISA
If ERISA covers an insurance plan, federal law requires the insurance company to follow certain procedures that protect you when you make a claim. Among others, ERISA protects claimants by doing the following:
- Requiring the insurance company to follow specific time limits when making a claim decision;
- Making the insurance company provide claimants with detailed and easy-to-read information when there’s a denial; and
- Requiring administrators to follow certain rules to avoid conflicts of interest.
As you know, insurance companies don’t always play fair with people making claims. They might drown you in paperwork and confusing jargon that makes it hard to fight a denial, or they might prolong the claim process to suit their needs. These games are particularly painful when you’re trying to manage a disability that affects your livelihood. ERISA protections can be crucial to receiving the benefits you deserve.
If you want to appeal a claim denial covered by ERISA, you have a short amount of time to do so (sometimes less than six months), and you must appeal the claim at the administrative level before you can file a lawsuit in court. The appeal deadlines under ERISA-covered plans are strictly enforced, and it’s best to bring denial notices to an experienced attorney immediately so they can meet the deadlines and fight for your benefits.
Which Long-Term Disability Plans Does ERISA Cover?
Whether ERISA covers your long-term disability depends on specific features of your plan. Generally, ERISA covers employer-sponsored group benefit plans that have the following qualities:
- The employer contributes to the plan;
- The plan isn’t completely voluntary;
- The employer does more than allow the insurance company to publicize the plan and collect premiums through payroll deductions; or
- The employer receives consideration beyond basic administrative fees.
A plan is not a covered employer-sponsored group benefit plan if benefits are paid out of an employer’s general funds. Also, government employees and employees of churches don’t normally have ERISA coverage for their long-term disability plans.
So if you work for the University of South Carolina or the Roman Catholic Dioceses, you’re probably exempt from ERISA long-term disability coverage.
ERISA also does not cover individually purchased private disability policies. These would be governed by state law, as discussed below.
If you’re unsure whether you have ERISA protections under your long-term disability plan, an experienced ERISA attorney can make that determination for you and fight for your rights.
What If My Long-Term Disability Plan Doesn’t Have ERISA Coverage?
If ERISA doesn’t cover your long-term disability plan, you still have options that allow you to appeal a denial or file a lawsuit.
First, you need to understand the terms of your policy and follow any processes it provides for appealing a denial. S
econd, if you’re unsuccessful in an appeal, you can file a lawsuit against your insurer. You could file a lawsuit for:
- Breach of contract,
- Unreasonable delay,
- Improper claim practices,
- Unreasonable denial, or
- Bad faith denial.
While ERISA requires insurers to handle your claim within a set period of time, South Carolina law requires insurers to take many actions within a “reasonable time.”
This is a tricky standard that insurance companies can twist to suit their own purposes and to deny you benefits. It’s important that you fight back against these tactics.
Understanding your rights under your insurance policy and fighting insurance companies is hard work. An attorney can do this hard work while you manage the effects of your disability.
ERISA Can Affect Your Long-Term Disability Claim
Congress intended for ERISA to help those being denied long-term disability coverage, and it largely achieves this goal. But there also are some downsides to being covered by ERISA.
ERISA preempts state laws that relate to any employee benefit plan, which means that it supersedes any conflicting or closely related state laws. While the courts continue to clarify which laws ERISA preempts, most group long-term disability plans end up being governed by ERISA.
Why does this matter? Because ERISA is a federal law, these claims must be filed in federal court. Federal cases can be more procedurally complicated and expensive.
Additionally, your case will be decided by a judge instead of a jury. The judge reviewing your case can’t reverse your plan administrator’s decision just because they disagree with it.
Instead, a judge evaluating ERISA law and a long-term disability claim usually considers only whether your plan’s administrator “abused their discretion.” This is a high hurdle to overcome in proving that your plan wrongly denied your long-term disability claim.
More importantly, your recovery is limited in ERISA cases. The most you receive if you win an ERISA case is the disability benefits you were entitled to and reasonable attorney fees.
Had you been allowed to file under state law, your attorney may have been able to argue that the insurer willfully denied your claim in bad faith and that you are entitled to punitive damages.
Punitive damages are designed to punish the defendant and deter future wrongful behavior.
In reality, most of this will not be an issue because many cases settle before a lawsuit is filed. And John Peace knows how to maximize the amount you receive from a settlement to help your get the disability benefits you need during this difficult time in your life.
Contact an Attorney Today to Claim What You’re Owed
Insurance companies write the policies they have to follow, and they have deep pockets that can overwhelm the average claimant during litigation.
Fortunately, attorney John Peace founded the Peace Law Firm to fight insurance companies that mistreat their claimants. John has been representing claimants in ERISA long-term disability cases for more than 19 years, and he believes in stepping up for the injured and mistreated.