Make illegal denials of coverage subject to compensatory damages
Recommendation
Congress should amend the Employee Retirement Income Security Act (ERISA) to make illegal denials of coverage subject to compensatory damages.
Background/summary
ERISA governs private-sector employer-sponsored benefits for nearly 140 million Americans.[1] Under ERISA, individuals can only recover the value of the benefits due under their plan if a claim is wrongfully denied. They cannot receive compensation for any other harms suffered or for punitive damages, no matter how egregious the conduct. The failure of ERISA to hold health plans accountable for damages that illegal conduct has caused leaves individuals and their families without recourse for the harm they have experienced. When plans are only liable for the benefits that they have denied, there is a clear incentive to deny coverage, particularly when less than one percent of denials are ever appealed.[2] By allowing individuals to bring a civil action under ERISA to recover damages that are a result of bad-faith conduct or breaches of the health plan’s fiduciary duty, plans would be incentivized to proactively avoid violations of health coverage laws, including the Mental Health Parity and Addiction Equity Act.
citations
1. U.S. Department of Labor, Employee Benefits Security Administration. FY 2021 MHPAEA Enforcement Fact Sheet. Last Accessed 2021.
2. Kaiser Family Foundation. Claims Denials and Appeals in ACA Marketplace Plans in 2021. Last Accessed February 9, 2023