By now, you may already have an idea of what the Employee Retirement Income Security Act (ERISA) is. This federal law was enacted in 1974 to protect American workers and their beneficiaries depending on health insurance, retirement benefits, or pensions. It achieves this by:
- Requiring qualified plans to inform its participants about their features and funding regularly
- Setting standards and guidelines on how employer-sponsored benefits should be managed
- Providing plan participants with appropriate remedies, such as the right to sue for unpaid benefits and breaches of fiduciary duty on the part of the plan administrator.
At the same time, ERISA exists to establish a formal process that hospitals can follow to make insurers pay on claims being rejected, delayed, or recouped. This is a massive game-changer for hospitals as one of the most significant factors contributing to their lost revenue is issues with insurance claims.
If you’re running a hospital or a medical facility, it’s not enough for you to understand what ERISA is. Instead, it's best to learn more about its scope and limitations. Doing this allows you to maximize the legislation to recover lost revenue and use the funds you retrieve to improve how you serve your patients. And while the intricacies of the ERISA law can be extensive and confusing, we'll be discussing the fundamentals of its coverage in the following sections to help you out.
What Plans Fall Under ERISA?
These plans are subject to ERISA:
- Employer-sponsored retirement plans (e.g., 401(k)s, pension plans, deferred compensation plans, profit-sharing plans)
- Health and dental insurance plans
- Disability insurance plans
- Life insurance plans
- Unemployment benefits
- Flexible spending accounts (FSAs)
Which Employers Are Covered by ERISA?
The general rule is that ERISA covers private-sector companies offering pension plans to their employees. This means that:
- All private entities, whether structured as proprietorships, partnerships, LLCs, S-corporations, and S-corporations, are covered by ERISA.
- Almost all nonprofit corporations and charitable organizations are also included.
- There’s no minimum number of employees a business must have to be eligible for ERISA; it can have only one or two employees and still be covered by the legislation.
Limitations of ERISA
Although ERISA is broad legislation, it is still subject to some specific limitations. For example, it does not apply to the following:
GOVERNMENT EMPLOYERS AND ENTITIES
ERISA does not cover benefit plans created under a collective bargaining agreement (CBA) between a government employer or entity and a union. With that said, you can check your state’s laws to learn more about ERISA’s limitations on government-initiated plans that apply to your area.
PLANS OPERATING OUTSIDE THE U.S.
Plans operating and maintained outside the country that benefits nonresident aliens are not covered by ERISA. This is because the legislation was passed to apply to American employees exclusively.
The Employee Retirement Income Security Act does not include benefit plans established by religious organizations to comply with workers’ compensation laws. Such organizations include churches, synagogues, mosques, and temples.
UNFUNDED EXCESS BENEFIT PLANS
Excess benefit plans such as stock-based incentive plans, deferred compensation plans, and recognition and retention plans are not covered by ERISA because they have no definite value — they can increase or decrease over time.
What Benefits Are Not Covered by ERISA?
Generally, almost every benefit and pension plan supported or offered by private entities will fall under ERISA. However, there are a few exceptions regarding sick pay plans and short-term disability plans.
They are not covered by ERISA if:
- They are paid out individually to employees.
- They are paid out as part of the regular payroll.
- They are financed not from pre-funded accounts but from general employer assets.
- The employee did not make contributions to the plan.
Some voluntary group insurance plans may also not fall under the legislation, especially if the employer does not contribute to the plan and the employees pay all the premiums through payroll deductions.
Understand the Ins and Outs of ERISA With Auraven
As a healthcare provider, you naturally want to accommodate every patient’s need and care for them in the best way possible. However, this already-demanding task will also entail dealing with the financial aspect of things, like processing claims, managing patient debt, and improving your revenue cycle management.
You can leverage ERISA to review your underpaid or rejected claims and recover your hospital’s written-off revenue — and you can do so easily once you understand the specifics. A thorough understanding of ERISA’s scope and limitations brings you one step closer to securing the reimbursement you rightfully deserve based on your patients’ benefit plans.
The good news is that you don’t have to handle your ERISA appeals on your own. Rather than take on the extra burden of studying the extensive legislation on top of your core operations, get guidance from the experts at Auraven.
Allow Auraven to handle your entire ERISA appeals process or have an ERISA consultant embedded into your team to manage your claims process onsite. You can also join our consultative appeals program, wherein you receive auditing, advice, and ERISA support for a predetermined number of hours each month.
Whether you wish to streamline your appeals process going forward or tap more revenue solutions, it’s best to turn to professionals who understand how ERISA works from the inside out, like Auraven. Contact us to learn how we can help win back your lost revenue.