Physician’s Plan Providing Group Discount for Disability Coverage Is Not Subject to ERISA

Many physicians in private practice are offered group discounts for signing up for disability insurance through their medical practice.  While the policies seem to be private contacts, when it comes time for file for benefits, often the insurers assert that the contract is governed by ERISA which grossly limits the rights of policyholders to benefits and suitable, just relief in Court if benefits are denied or terminated.  The Department of Labor’s safe-harbor provision (29 C.F.R. Section 2510.3-1(j).) exempts from ERISA any group-type insurance program an insurer offers to employees or members of an employee organization if all of certain criteria are met.  This fact sensitive analysis requires consideration of who pays the premiums, who collects them; whether the employer endorses the plan whether the employer receives consideration in connection to the program and how involved the employer is in the program administration. In Gooden v. Unum Life Ins. Co. of Am._ 2016 U.S. Dist. LEXIS 75363 (E.D. TN 3/30/16) the court analyzed the facts and determined, against Unum’s objection that the plan qualified under the safe harbour provision.  The clinic received correspondence from UNUM as a request for updated income information. The court determined that a plan that gives group discount solely on the basis that a group of doctors used their employer’s payroll deductions in a  “Flex-bill” arrangement to pay insurance premiums is not considered to be an employer financial contribution.  Here the clinic, the doctor’s employer’s organization did not endorse the program  but remained neutral.  Allowing an insurer to publicize its program is permitted under safe-harbor.  The court explained, “[T]he safe-harbor nowhere requires an employer to stay out of the arrangement altogether-remaining neutral does not require an employer to build a moat around a program or to separate itself from all aspects of program administration”. Finally merely completing a claim form for an employee seeking disability benefits is not a strong indication of endorsement of the policy.

Here at Bonny G. Rafel, LLC  we litigate against the application of ERISA when the facts justify safe harbor protection.  Our clients deserve the right to access to the justice system, and all available remedies, not blunted by the constricts of ERISA regulation.   Bonny G. Rafel, Esq.

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