More Commentary on the Grand Irony of ERISA

Posted on Categories Labor & Employment Law

Erisa Thanks to Ian Millhiser (National Senior Citizens Law Center) who wrote this piece about the inequities of employee benefits law under ERISA with his colleague Simon Lazarus for the U.K. Guardian.

Here’s a taste:

Erisa sets strict standards to ensure that employers and insurers administering group benefit plans act “solely in the interests of beneficiaries for the exclusive purpose of providing benefits,” not their own bottom-line. But the court has rendered these protections meaningless. In a Catch-22 decision written by Justice Scalia, a 5-4 majority held that, when plan administrators violate their obligations under the law, victims may not recover any monetary compensation for resulting losses they suffer. Adding insult to injury, the court has read Erisa as a warrant for “pre-empting” – ie abolishing – pre-existing state law protections, leaving victims with literally no recourse. Thus, in the words of, the late Justice Byron White, the supreme court has achieved the “perverse anomaly of leaving those Congress set out to protect with less protection than they enjoyed before Erisa was enacted.”

 

When forced to apply the supreme court’s “tangled” Erisa rules, ordinarily circumspect federal judges have often harshly attacked them. Most famously, the late Chief Judge Edward Becker, a Republican named to the third circuit court of appeals by President Reagan, excoriated Justice Scalia and his allies for converting Erisa “into a shield that insulates HMOs from liability for even the most egregious acts of dereliction committed against plan beneficiaries, a state of affairs directly contrary to the intent of Congress.” Judge Becker stressed that the court’s distortion of Erisa creates “strong incentives for HMOs to deny claims in bad faith or otherwise ‘stiff’ participants.” The systemic result, he added, is a “‘race to the bottom’ in which the most profitable HMOs will be those that deny claims most frequently.”

This topic is near and dear to my heart and the subject of my current paper: “Sorry, No Remedy: The Grand Irony of ERISA.”  I agree with the authors of this commentary that the Obama administration must take action to right this ship.  They recommend legislatively “fixing” bad ERISA precedent and to select new judges that are more sensitive to the aims of the law.

More specifically, I would like to see Congress clarify current ERISA preemption doctrine to allow for more state experimentation in the area of health care financing and to make clear that “equitable relief” under Section 502(a)(3) of ERISA means exactly what it means under Title VII: backpay and other make whole relief.

Cross posted at Workplace Prof Blog.

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