What is the appeals and grievance process like?

What specific appeals and grievance procedures apply, and the extent and nature of legal remedies available, vary significantly from state to state, company to company, and often depend upon whether the health insurance or plan is or is not one covered by the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiple Employer Pension Protection Act of 1980 (MEPPA), typically collectively referred to as ERISA.

The original noble idea behind this federal law was protection of employee benefits and pension moneys from mismanagement or theft by incompetent or greedy trustees or by organized crime. Unfortunately, except for state laws that actually regulate insurance companies or health plans, ERISA also preempts (eliminates) any state law or remedy for insured or plan members that might otherwise relate to the administration of employee benefits, including health care insurance benefits, obtained through employment. In other words, as a practical matter, if a claim for health benefits or service is denied to a person who obtained health insurance coverage through employment, they are limited to the appeals and grievance procedures in the policy or plan and cannot sue in court for such things as breach of contract, breach of the implied covenant of good faith and fair dealing (bad faith), infliction of emotional distress, fraud, etc..

Typically, if the policy or plan is governed by ERISA, the only legal remedy outside of the policy or plan is to ask a court to review the claim denial decision to see if there was an abuse of discretion, which is extremely difficult to establish. Even if an abuse of discretion is established, the claimant is only entitled to receive the benefit or service that was originally denied, and that is often too late to help. In contrast, if the plan is an insured plan, and NOT subject to ERISA, the Insurer's Bad Faith can give rise to punitive damages.

Nearly 70% of the health care insurance currently in place in the United States is subject to ERISA. The balance of the health insurance in America is not subject to ERISA. The primary exceptions from ERISA are any health insurance policies or plans issued to individuals, and any group health insurance or plan coverage for employees of any state or local governmental agency or district, and any employee of a church or church affiliated organization. In addition, ERISA may not apply even if the health insurance coverage is obtained through private employment if the following four factors all apply: (1) the employer or employee organization did not contribute in any way to or any portion of premiums, (2) the participation in the employee benefit plan or program was voluntary, (3) the employer or employee organization did not endorse or administer the insurance and, (4) the employer or employee organization did not receive any commission or participation fee in connection with the insurance program or plan.