Although you may not have heard of it before, ERISA is a federal law that likely affects you if you receive employment benefits. ERISA stands for the Employee Retirement Income Security Act, which took effect in 1974. Despite the name, ERISA also applies to health insurance.
The idea behind ERISA is to ensure that both your employer and the insurance company are transparent and honest in managing your health insurance, retirement plan and other employment benefits so that you receive what you expect and deserve.
When it comes to employment benefits, your employer acts as a fiduciary. The function of a fiduciary is to manage assets on someone else’s behalf. More specifically, your employer has the responsibility to work with the insurance company for your benefit.
- Choosing a service provider
In this case, the service provider is the insurance company that provides health benefits. Your employer has the responsibility to gain information about several firms, check to see that each has valid accreditations, licenses and ratings and make comparisons in regard to costs, services offered, etc.
- Monitoring a service provider
After choosing an insurance company, your employer should conduct periodic formal reviews to ensure that it is still meeting the needs of employees. The review process should include evaluating the maintenance of plan records, policies and practices, actual fees charged and complaints from participants.
- Depositing employee contributions
Whether you pay your health insurance premium directly or have it deducted automatically from your paycheck, it is the responsibility of your employer to deposit your contributions in a timely fashion.
- Assessing fees
The law requires that fees charged to a plan be reasonable, but it does not specify a permissible level. Therefore, it is the responsibility of your employer to determine whether or not the plan’s fees are reasonable and remain so via routine monitoring.
- Maintaining claims procedures
In regard to ERISA plans, the Department of Labor has minimum standards in place regarding reasonable claims procedures. Your employer has a responsibility to ensure that your insurance company’s claim procedures are in compliance with these standards.