Many employees in ERISA plans are afraid to complain, Oklahoma insurance chief says
Many employees covered by ERISA health insurance plans are afraid to pursue complaints about their employer’s health coverage because of "fear of retribution or job loss," according to Oklahoma Insurance Commissioner John P. Crawford.
The conclusion is contained in a report about his office’s first year experience under a two-year pilot project with the Department of Labor (DOL) which authorizes the insurance department to follow-up complaints about health coverage from consumers in those plans.
Oklahoma insurance officials say only about 10% of employees covered under ERISA plans who call in with an inquiry or complaint about their employer’s health coverage are submitting written complaints that can be followed up.
"With a private carrier, consumers are dealing with an entity that is separate from their employer," the statement reads. "However, with an ERISA plan, the plan and employer are one. Consumers fear retribution if they appeal or fight their ERISA plans over coverage and benefits."
The landmark agreement with the DOL authorizes the Oklahoma commissioner’s office to assist consumers covered by self-insured health plans that are governed by the Employee Retirement and Income Security Act (ERISA) of 1974. While ERISA preempts state regulation of employer plans, under Oklahoma’s agreement with the DOL, plans must respond to the regulator when there are consumer complaints. Oklahoma is the only state that has made such an arrangement with the DOL.
Overall, Mr. Crawford’s office received 508 written complaints during 1997 from Oklahoma residents covered under an ERISA plan:
• about 28% were resolved with benefits being paid; the most common reason for delay in payment was "foot dragging" on the part of the plan;
• about 3% were referred to the DOL for possible violations of ERISA; and
• in 50% of cases, the employer/plan position was "upheld."
The fact that half of complaints were settled in favor of companies is deceptive, said Stacy Martin, spokeswoman for the Oklahoma Insurance Department. While employers were complying with the law, consumers may have submitted complaints because their benefits offered less coverage than traditional plans or because they may not have included state-mandated benefits, which is allowed under ERISA. Plans also do not have to follow standard practices or benefits followed by private sector carriers and they may drop benefits without prior notice to the insured. ERISA plans only need to notify the insured within sixty days after the fact, according to the commissioner’s statement.
"Consumers have far fewer rights under these (ERISA) plans. We are very concerned about this as insurance
"Consumers have far fewer rights under these (ERISA) plans. We are very concerned about this as insurance regulators, Mr. Crawford said in his statement. "The good news is that the Oklahoma Insurance Department has been able to help many consumers individually with their ERISA complaints. The bad news is there are many fundamental problems with ERISA plans which cry out for reform," Mr. Crawford said.
Some of the primary weaknesses of ERISA, he said, include:
• No requirement for plans to post reserves to back up payment of claims. Without this cushion, employers are vulnerable to large claims or bad claims years. This not only puts consumers at risk of unpaid claims but also places employers at financial risk. If an employer goes bankrupt, there is no guaranty fund protection. Employers can simply file for bankruptcy, then reopen with a separate Federal Identification Number.
• Plan benefits can be changed at will. ERISA plans do not have to maintain a standard of benefits. As medical costs escalate, Mr. Crawford said employer-sponsored plans may be "increasingly taking back benefits."
• No punitive damages or bad faith exposure. If plans deny benefits, consumers cannot collect punitive damages or compensation for costs such as lost wages, need for additional services, etc. Liability for these costs "may not be the only way to provide accountability; but the point is, there needs to be some," Mr. Crawford said.
Mike Seney, vice-president for State Chamber, Oklahoma’s Association of Business and Industry, which represents many of the state’s large self-insured employers, said the commissioner’s statement seemed like "more of an editorial, with not a lot of detail."
Mr. Seney said he and large employers in the state would like a report that breaks down what kind of inquiries and complaints were received by the commissioner’s office and how they were handled. It’s "a tremendous jump" for the commissioner to say that only 10% of inquiries result in written complaints because "people were afraid to lose their jobs by filing a written complaint," he said. Callers may have had their questions answered or the problem may have been addressed, he noted.
Mr. Seney said he has heard nothing about the pilot project from employers or from the insurance commissioner’s office since the program was launched a year ago. At that time, the commissioner met with self-insured employers and told them he would be in close communication with them, Mr. Seney said.
Bruce Ruud, regional director for the Department of Labor in Dallas, said the federal agency was approached by Oklahoma to do the pilot project. Other states have contacted the DOL about getting similar authorizations to handle consumer complaints, but Mr. Ruud said the agency wants to wait and see how the two-year pilot with Oklahoma works. "They’ve referred some matters to us but are handling the majority themselves," said Mr. Ruud, who adds that it is too early to take stock of the project.
The insurance commissioner’s office used eight internal codes to classify how calls were handled or disposed, but this information was not released with the statement. Mr. Crawford was also not available for an interview.
Because callers often didn’t know if they were covered under an ERISA plan, Ms. Martin said it frequently was up to the commissioner’s staff to make this determination with the aid of a directory from the DOL’s Pension and Welfare Administration, which lists all such plans. Another challenge for the commissioner’s staff, she said, has been distinguishing between third-party administrators and self-insured plans.
"We’re breaking ground," said Ms. Martin. "We’re the first state regulatory agency to crack the federal veil and provide local assistance to local constituents."
Contact Ms. Martin at 405-522-4644.