Request Denied?

Employees who participate in group health insurance could be left with a hefty tab if the insurer denies a claim. A little-known provision in the Employee Retirement Income Security Act of 1974, or ERISA, holds that, with a few exceptions, people who get health coverage through a group policy at work cannot sue their insurance companies under state law, and their options under federal law are limited, says Arnold Levinson, an attorney and partner at Pillsbury & Levinson LLP in San Francisco.

"Under federal law, the insurance company gets to decide whether your claim is paid or not, and they don't even have to be right," Levinson says. "All they have to do is show that they were not arbitrary and capricious. While you might be able to sue in federal court, you can't win unless you prove the insurance company [was] arbitrary and capricious."

One solution, Levinson says, is to stop offering group coverage and simply increase wages so your employees can buy their own insurance. Another is to set up your health coverage under a safe harbor outside ERISA. The com-pany can't sponsor the plan or pay any of the premiums, and you must comply with other el-ements of the safe harbor provision. Consult with an attorney who has expertise in ERISA to make sure your plan meets the requirements.

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