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ERISA FAQ

  • The Employee Retirement Income Security Act of 1974 (“ERISA”) is a broad and complicated statute that is applied inconsistently by courts, particularly in payment disputes between payors and emergency medicine providers.  These FAQ’s address common ERISA questions including those that arise in payor-provider disputes involving emergency medicine providers seeking to recover unpaid fees from payors for services provided.

    What is ERISA?

     

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    Answer

    ERISA is a federal statute intended to protect “the interests of participants in employee benefit plans and their beneficiaries” by creating a uniform, nationwide set of standards to govern those plans. ERISA applies to all self-funded employee welfare benefit plans, funds, or programs established for the purpose of providing beneficiaries, through the purchase of insurance or otherwise, medical, surgical, or hospital care or benefits ....”  Especially important to emergency physicians is the fact that ERISA covers essentially all self-funded plans provided by private-sector employers, with limited exceptions. 

    To ensure uniformity in the law governing benefits plans, Congress included provisions in ERISA to ensure that it would preempt, or trump, state law.  Unfortunately, health insurers have sometimes taken advantage of ERISA’s broad application and used the statute as both a sword and a shield, invoking ERISA to establish unilateral and unfair payment practices as well as to prevent providers from seeking full payment for their services.

    Answer

    ERISA is a federal statute intended to protect “the interests of participants in employee benefit plans and their beneficiaries” by creating a uniform, nationwide set of standards to govern those plans. ERISA applies to all self-funded employee welfare benefit plans, funds, or programs established for the purpose of providing beneficiaries, through the purchase of insurance or otherwise, medical, surgical, or hospital care or benefits ....”  Especially important to emergency physicians is the fact that ERISA covers essentially all self-funded plans provided by private-sector employers, with limited exceptions. 

    To ensure uniformity in the law governing benefits plans, Congress included provisions in ERISA to ensure that it would preempt, or trump, state law.  Unfortunately, health insurers have sometimes taken advantage of ERISA’s broad application and used the statute as both a sword and a shield, invoking ERISA to establish unilateral and unfair payment practices as well as to prevent providers from seeking full payment for their services.

  • Some states are enacting “surprise bill” legislation that bans balance billing in certain circumstances.  Doesn’t ERISA prevent states from doing this?

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    Answer

    As of February 5, 2021, 33 states have enacted legislation designed to limit a patient’s payment obligation when they are treated by an out-of-network provider. Laws vary state to state with differences in the types of networks, plans, facilities and providers subject to the regulations. But they generally prohibit providers from billing patients for emergency care beyond the allowed cost-sharing amounts under their plans.  Some surprise bill laws, like those in Florida and New York, also contain payment standards intended to ensure that out-of-network providers receive fair compensation from insurers for their services (e.g., 80th percentile of the FAIR Health database).  Others do not, leaving providers vulnerable to systemic underpayments from insurers. It is possible that states may enact new legislation or modify existing legislation in response to the passage of the No Surprises Act and subsequent regulations.

    If ERISA trumps state law, how can states do this? While ERISA regulates employee benefit plans for self-insured employers (the employer takes on the cost risks), states are still permitted to regulate insurance products that are fully insured by the insurance company (i.e. the insurance company takes on the cost risks). Generally, this means that states can still impose certain restrictions on companies that want to conduct insurance business in their states, such as HMOs.  True “self-funded employee health benefit plans,” however, are not considered “insurance” and are not subject to state “surprise bill” laws (although some states, like New York, disagree and have attempted to regulate self-insured plans). Some states have allowed self-insured employers to “opt in” to state laws, and through this mechanism a self-insured ERISA plan can be subject to state laws. 

    Answer

    As of February 5, 2021, 33 states have enacted legislation designed to limit a patient’s payment obligation when they are treated by an out-of-network provider. Laws vary state to state with differences in the types of networks, plans, facilities and providers subject to the regulations. But they generally prohibit providers from billing patients for emergency care beyond the allowed cost-sharing amounts under their plans.  Some surprise bill laws, like those in Florida and New York, also contain payment standards intended to ensure that out-of-network providers receive fair compensation from insurers for their services (e.g., 80th percentile of the FAIR Health database).  Others do not, leaving providers vulnerable to systemic underpayments from insurers. It is possible that states may enact new legislation or modify existing legislation in response to the passage of the No Surprises Act and subsequent regulations.

    If ERISA trumps state law, how can states do this? While ERISA regulates employee benefit plans for self-insured employers (the employer takes on the cost risks), states are still permitted to regulate insurance products that are fully insured by the insurance company (i.e. the insurance company takes on the cost risks). Generally, this means that states can still impose certain restrictions on companies that want to conduct insurance business in their states, such as HMOs.  True “self-funded employee health benefit plans,” however, are not considered “insurance” and are not subject to state “surprise bill” laws (although some states, like New York, disagree and have attempted to regulate self-insured plans). Some states have allowed self-insured employers to “opt in” to state laws, and through this mechanism a self-insured ERISA plan can be subject to state laws. 

  • Should providers consider different approaches to challenging reimbursement, depending on whether claims are denied altogether versus underpaid?

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    Answer

    Courts have interpreted ERISA to prohibit state law claims against payors where a provider seeks to enforce the “right to payment,” but not where a provider challenges the “rate of payment.”  The theory is that a lawsuit seeking to enforce the right to payment – i.e., challenging a claim denial – is really a claim questioning the underlying benefits under the plan, and therefore must be pursued through the payor’s appeals process and then brought as an ERISA action in federal court.  In contrast, where claims are approved but underpaid, seeking additional payment is frequently not viewed by courts as a “claim for benefits” under ERISA because the payor has already acknowledged that benefits are due, but rather only a dispute over how much is owed.  In that case, providers may be able to bring an action in state court, without being bound by the strict appeal deadlines and processes that payors often impose through their health plans.

    Answer

    Courts have interpreted ERISA to prohibit state law claims against payors where a provider seeks to enforce the “right to payment,” but not where a provider challenges the “rate of payment.”  The theory is that a lawsuit seeking to enforce the right to payment – i.e., challenging a claim denial – is really a claim questioning the underlying benefits under the plan, and therefore must be pursued through the payor’s appeals process and then brought as an ERISA action in federal court.  In contrast, where claims are approved but underpaid, seeking additional payment is frequently not viewed by courts as a “claim for benefits” under ERISA because the payor has already acknowledged that benefits are due, but rather only a dispute over how much is owed.  In that case, providers may be able to bring an action in state court, without being bound by the strict appeal deadlines and processes that payors often impose through their health plans.

  • Can providers still seek payment through an ERISA action if they have a right to bring a claim for payment under a state statute?

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    Answer

    Some states, like Florida, give providers a right to bring suit against payors in state court who do not meet the minimum payment standards under their “surprise bill” laws.  Nothing prevents providers from simultaneously pursuing ERISA appeals.  Compared to ERISA claims, state law claims are often easier to pursue because they give providers more time to bring claims than they would have to bring an ERISA appeal.

    Answer

    Some states, like Florida, give providers a right to bring suit against payors in state court who do not meet the minimum payment standards under their “surprise bill” laws.  Nothing prevents providers from simultaneously pursuing ERISA appeals.  Compared to ERISA claims, state law claims are often easier to pursue because they give providers more time to bring claims than they would have to bring an ERISA appeal.

  • Does the Patient Protection and Affordable Care Act (PPACA) “Greatest of Three” Rule’s payment standards apply to PPACA Exchange plans only, or does it also cover ERISA plans?

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    Answer

    The “Greatest of Three” Rule – part of a federal regulation issued under the PPACA – requires group health plans or health insurers to pay for out-of-network emergency services in an amount at least equal to the greatest of (1) the amount negotiated with in-network providers; (2) an amount calculated using the same method the plan “generally” uses to calculate out-of-network payments, such as the “usual, customary, and reasonable amount,” or (3) the Medicare rate for the emergency services.[1]  The Department of Health and Human Services and the Department of Labor jointly issued this regulation, so it applies both to PPACA plans as well as ERISA plans.[2]

     

     

     

    Answer

    The “Greatest of Three” Rule – part of a federal regulation issued under the PPACA – requires group health plans or health insurers to pay for out-of-network emergency services in an amount at least equal to the greatest of (1) the amount negotiated with in-network providers; (2) an amount calculated using the same method the plan “generally” uses to calculate out-of-network payments, such as the “usual, customary, and reasonable amount,” or (3) the Medicare rate for the emergency services.[1]  The Department of Health and Human Services and the Department of Labor jointly issued this regulation, so it applies both to PPACA plans as well as ERISA plans.[2]

     

     

     

  • How does the new No Surprise Medical Billing Legislation passed in December 2020 affect this topic?

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    Answer

    On December 27, 2020, the Consolidated Appropriations Act (CCA) of 2021, which includes the No Surprises Act, was enacted and contains provisions to help protect consumers from surprise bills starting January 1st, 2022.

    The legislation applies to ERISA plans, and to fully insured plans that do not have an out of network payment rate set by a state balance billing law, however, there is much to be learned and clarified about the detailed rules of how this legislation will be enacted and enforced.3,4 At this time, due to ambiguity in the regulations, it is unclear if ERISA plans will be subject to specific state rules about Surprise Medical Billing or that ERISA plans will be subject to the federal rules. As 2022 progresses, there will be inevitable disputes and more clarity as to the process for determining reimbursement rates and settling disputes. 

    References:

    1. Patient Protections 45 C.F.R. 147.138(b)(3)(i)

    Patient Protections 10-1-2010

    1. Final rule for Patient Protections Under the Affordable Care Act, 80 Federal Register 72, 192 (2-27-2015)

    Final Rule PPACA 2-27-2015

        3. Requirements Related to Surprise Billing; Part I

    https://www.federalregister.gov/documents/2021/07/13/2021-14379/requirements-related-to-surprise-billing-part-i 

        4. Requirements Related to Surprise Billing; Part II

    https://www.federalregister.gov/documents/2021/10/07/2021-21441/requirements-related-to-surprise-billing-part-ii

    Answer

    On December 27, 2020, the Consolidated Appropriations Act (CCA) of 2021, which includes the No Surprises Act, was enacted and contains provisions to help protect consumers from surprise bills starting January 1st, 2022.

    The legislation applies to ERISA plans, and to fully insured plans that do not have an out of network payment rate set by a state balance billing law, however, there is much to be learned and clarified about the detailed rules of how this legislation will be enacted and enforced.3,4 At this time, due to ambiguity in the regulations, it is unclear if ERISA plans will be subject to specific state rules about Surprise Medical Billing or that ERISA plans will be subject to the federal rules. As 2022 progresses, there will be inevitable disputes and more clarity as to the process for determining reimbursement rates and settling disputes. 

    References:

    1. Patient Protections 45 C.F.R. 147.138(b)(3)(i)

    Patient Protections 10-1-2010

    1. Final rule for Patient Protections Under the Affordable Care Act, 80 Federal Register 72, 192 (2-27-2015)

    Final Rule PPACA 2-27-2015

        3. Requirements Related to Surprise Billing; Part I

    https://www.federalregister.gov/documents/2021/07/13/2021-14379/requirements-related-to-surprise-billing-part-i 

        4. Requirements Related to Surprise Billing; Part II

    https://www.federalregister.gov/documents/2021/10/07/2021-21441/requirements-related-to-surprise-billing-part-ii

Updated February 2022

Disclaimer

The American College of Emergency Physicians (ACEP) has developed the Reimbursement & Coding FAQs and Pearls for informational purposes only.   The FAQs and Pearls have been developed by sources knowledgeable in their fields, reviewed by a committee, and are intended to describe current coding practice. However, ACEP cannot guarantee that the information contained in the FAQs and Pearls is in every respect accurate, complete, or up to date.

The FAQs and Pearls are provided "as is" without warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability and fitness for a particular purpose. Payment policies can vary from payer to payer. ACEP, its committee members, authors or editors assume no responsibility for, and expressly disclaim liability for, damages of any kind arising out of or relating to any use, non-use, interpretation of, or reliance on information contained or not contained in the FAQs and Pearls. In no event shall ACEP be liable for direct, indirect, special, incidental, or consequential damages arising out of the use of such information or material. Specific coding or payment related issues should be directed to the payer.

For information about this FAQ/Pearl, or to provide feedback, please contact David A. McKenzie, ACEP Reimbursement Director at (469) 499-0133 or dmckenzie@acep.org.

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