Definition of an ERISA Group Insurance Plan

An ERISA group insurance plan is federally regulated self-funded health insurance offered by employers to their employees. Regulations for this type of insurance were put in place by the Employee Retirement Income Security Act (ERISA) in 1974.

Facts

• Self-funded group health insurance is also referred to as self-insured. The employer pays the medical bills rather than an insurance company.

Coverage

• The health insurance coverage benefits vary with this type of coverage. The benefits are determined by the employer. However, under ERISA regulations, there must be a defined plan that is put in writing in the form of a plan summary. Premium amounts and the percentage that must be paid by the employee are also left to the discretion of the employer.

Regulation

• This type of group health insurance is not subject to state laws, including group health insurance, that is purchased from a private insurance company. When ERISA was passed, federal regulations were put in place to help protect the rights of employees insured through a self-funded group health plan.

Requirements

• In accordance with federal regulations, employees enrolled in a self-funded group health insurance plan must be given a summary plan description that lists the benefits provided, the employee's rights and any other pertinent information about the plan and benefits.

Rights

• Regulations set forth by ERISA protect the insured employee's right to receive an explanation for the denial of claims and the right to appeal such decisions. Detailed instructions on how to dispute a claim decision must be provided to the insured employee within the summary of benefits. ERISA also protects the beneficiary's right to sue the employer for failure to uphold fiduciary responsibilities.

Administration

• A private insurance company is sometimes hired by an employer to administer the self-funded health insurance. This does not mean the insurance plan is subject to state regulations. It is still a self-funded health insurance and is therefore not regulated by state laws.

  Whether the employer contracts with an insurance company to manage the program or hires others to manage it, there are strict regulations set forth by ERISA that apply to the fiduciaries or people who manage the fund. Plan trustees, administrators, and investment committees are all considered plan fiduciaries.

  The plan and funds used to operate the plan must be managed prudently and in the best interest of the beneficiaries and participants. The plan and funds must be used for providing health care benefits and to pay related expenses. Any fiduciaries who do not comply can be held personally responsible.