What is ERISA?
ERISA is the abbreviation for the Employee Retirement Income Security Act.
Let’s say you live in a state with a parity law – like California’s AB88. Wahoo! Right? Not so fast. Here is the glitch – The law only pertains to SOME insurance companies. The insurance plans that are self-funded, are exempt! Ouch.
How do you know if your company’s insurance plan is self-funded? Ask the HR department or call the insurance company and ask. Once you know the answer, you know where to go from there. If the plan isn’t self-funded, follow these guidelines for billing. If the plan is self-funded, keep reading this section below to understand more about the state and federal laws and what you can do about them.
YOU NEED TO KNOW THIS! If you live in North Carolina but your insurance policy is funded and written out of Colorado, whose law governs your insurance? Colorado. The state where the insurance policy is funded and written is key. The front page of your policy usually states where it’s written and funded.
States have authority over insurance covering a majority of people in the private insurance market. But states have no authority over self-funded ERISA plans. Several of ERISA’s provisions preempt state law. ERISA’s “preemption clause” makes void all state laws to the extent that they “relate to” employer-sponsored health plans.
ERISA preemption takes three steps.
- ERISA preempts all State laws that affect employee benefits.
- State laws involving insurance are saved from preemption.
- However, a self-funded employee benefit plan will not be deemed to be insurance.
Thus, if a Plan is self-funded, then the plan is deemed not to be insured, and therefore is not saved from preemption. A plan is self funded if the employer is responsible for the cost of medical benefits and does not purchase protection from an insurance company. Here is a great primer to ERISA preemption.
From the SUPREME COURT OF THE UNITED STATES Syllabus
AETNA HEALTH INC., FKA AETNA U. S. HEALTHCARE INC. ET AL. v. DAVILA CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 02–1845. Argued March 23, 2004—Decided June 21, 2004*