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The List Bill - Inadvertently Creating an ERISA Plan?

A recent ruling from a federal court in Alabama - Rosen v. Provident Life and Accident Insur. Co., 2015 WL 260839 (N.D.Ala. January 21, 2015) addressed a controversial issue involving ERISA preemption. Typically, ERISA is implicated only where an employer sponsors a retirement plan or offers group coverage to its employees for disability, life, or health insurance.  However, several insurance companies offer employers a discount on premiums if they are able to issue a series of individually underwritten disability insurance policies, and the premiums are billed to the employer on a single bill.  This often occurs with medical and legal professional practices.  Many courts have held that such a practice established an ERISA welfare benefit plan.



However, the Rosen case ruled otherwise.  The court observed: 


With nothing in the record called a "plan", or a "sponsor", or a "plan administrator", or a "claims  administrator" Provident is necessarily arguing that Rosen was required on his own to figure out that that he was covered for disability, if at all, by an employee ERISA benefit plan, and that he should  have proceeded to seek any benefits to which he is entitled under the ERISA scheme. This is a tall  order. If he had started such a process by asking for a copy of the summary plan description, there  was none to give him.


Thus, the court held that no ERISA plan was created where there was a single policy and the employer was merely the conduit for the payment of premiums.  Since Rosen was the only employee eligible to receive benefits, Provident could not characterize his coverage as falling within an employee benefit plan covered by ERISA.


The origin of this issue stems from an infamous memorandum authored by a Provident employee Jeff McCall on October 2, 1995, in which he exhorted Provident personnel to try to characterize anything remotely related to ERISA as ERISA-governed in order to avoid extra-contractual damages.  However, the author of this ruling, Judge William Acker, Jr., found the insurer's efforts in this case another example of ERISA's potential over-reach.  


Even though Judge Acker found that this case was outside the bounds of ERISA preemption, other courts have ruled otherwise.  Thus, any organization that has purchased coverage through a "list-bill" arrangement should review that coverage to ascertain the employer's intent is fulfilled and that the insurer cannot pull an ERISA rabbit out of their hat in the event a claim is made by an individual policyholder.  

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