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Health Insurance And ERISA

Aug. 5, 2016

When a health insurance company has no “in network” providers and refuses to pay for necessary “out of network” treatment, it’s a difficult question about whether it constitutes bad faith.

There are several variables to consider:

First, it depends on what kind of coverage the individual has. If it’s an employer-sponsored plan and it’s an employee benefit, then there is no insurance bad-faith because it’s covered by ERISA (the Employee Retirement Income Security Act). Under this law, there is no bad faith; the only thing the employee would get would be breach of contract-type damages. In other words, payment of the medical bills only.

The challenge with ERISA is that one must prove that the insurance company or the plan administrator’s actions were an abuse of discretion – that it was arbitrary and capricious. This is a higher standard of review than a normal breach of insurance contract cause of action, which is determined based on a preponderance of evidence.

There is no Jury trial in an ERISA case. You have to file in Federal Court, and the judge is the one who makes the final determination based on the administrative record. You don’t get to add documents to the administrative record after it’s already been created. It has what was presented to the plan administrator or the insurance company in reviewing the claim and to show that using those records they abused their discretion.

It’s more difficult than a standard breach of contract bad faith case. So, if the insurance company fails to pay the only provider in town, and the provider is out of network, if you can show based on the plan documents or the insurance contract that he should have paid, then you may have a bad-faith breach of contract claim based off of the documents. Again, that is only if the individual was paying for the insurance premiums on their own, and it wasn’t an employer-sponsored plan.

If you’re not sure whether your insurance policy is covered by ERISA, or if you have questions about your ERISA claim, please speak with an experienced insurance attorney as soon as you can to learn your rights and options.