Anyone who has insurance is vulnerable to insurance fraud. It does not matter what type of policy you hold, whether you have an individual plan or employer based insurance –you are not safe from insurer bad-faith practices. What is more, even people who have high paying jobs with great insurance plans don’t know they are at risk. Speaking of employer based insurance, most people don’t know about a little thing called ERISA preemption.
The Employee Retirement Income Security Act of 1974 is a federal law that was intended to protect the retirement benefits of employees against mergers, acquisitions, and other corporate activities that might otherwise have endangered such funds. Originally ERISA had nothing to with overruling state insurance regulations. It specifically approved of the use of state laws to regulate insurance practices. That was until the insurance companies went to the US Supreme Court and argued that they could lower insurance premiums on health insurance policies purchased in the workplace and, thereby, make insurance more affordable to people if the Supreme Court would agree to preempt state laws. And in the 1987 ruling written by Justice Sandra day O’Conner, in the case of Pilot Life v. Dedeaux, the court decided that a state law that does not directly regulate the business of insurance is preempted by ERISA for insured plans, essentially eliminating the legal rights –established over many years-that protect policy holders from fraudulent and bad-faith insurance practices.
Now, without federal laws making it illegal for an insurance company to defraud somebody or ensuring accountability for bad-faith practices, insured people in almost every state are having their rights taken away, because of ERISA preemption. Here at the Brod Law Firm, we know that the likely hood of ERISA reform is slim, considering that the insurance companies are the strongest lobby in Congress (FYI: ERISA is also our roadblock to health care reform). But you can help lobby Congress by calling and voicing your concerns to your local Congressional representative and your state’s U.S. Senators. If you feel that you are the victim of bad-faith practices and have questions about the state law and how it will (or will not) protect you, please contact us.