When is an insurance policy not an ERISA plan? | Jackson Lewis CP

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ERISA specifies that it governs “any plan, fund or program…established…by an employer…for the purpose of providing [health benefits] for its participants. 29 USC § 1002(1). Although most benefit plans that provide benefits to employees are governed by ERISA, some arrangements are not. The recent decision of the Northern District of Illinois in Till v National General Accident & Health Insurance Co., No. 21-1256 (ND Ill. March 8, 2022), provides guidance on the types of arrangements that may not constitute an ERISA plan.

The applicant in Until went to the hospital for medical treatment and the next day took out a health insurance policy issued by the defendant. The policy was purchased through an association and provided cover only to the plaintiff. The day after the policy was taken out, the plaintiff returned to the hospital and was treated for a pulmonary embolism. The defendant denied coverage, citing the policy’s exclusion of pre-existing conditions. The plaintiff then sued, claiming the denial violated ERISA. According to the plaintiff, the policy qualified as an ERISA plan because he had purchased it through an association of employers.

The defendant requested dismissal, arguing that the policy was not governed by ERISA. The court agreed, concluding that ERISA governs plans arising from employment relationships and that one cannot have an employment relationship with oneself. In other words, the ERISA definitions of employer and employee contemplate separate parties. In this case, the plaintiff had not alleged that his business had any employees, and the policy only offered coverage to the plaintiff as an individual.

Further, the court found that the plaintiff had not plausibly alleged that the association through which he purchased his policy met ERISA’s definition of an “employers’ association”. . The court said that under the relevant regulations, for an association to meet the definition, it must be established by a group of employers to provide benefits to employees, have at least one significant business purpose unrelated to the benefits, have employer members who control the plan and meet the various documentation requirements for plans established by the Department of Labor. The court found that the plaintiff had not plausibly alleged that the association met these requirements because he had not alleged any facts about the association. For this additional reason, the policy was not governed by ERISA and the case was dismissed.

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