How Do I Know if I Have an ERISA Disability Plan or a Private Insurance Plan, and Why Do I Care?

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ERISA vs. Private/Individual Disability Insurance Plan

There are several differences in ERISA and individual long-term disability policies. Among those differences are benefits, taxation, costs, and how you appeal a denial. The kind of plan you have could affect how your disability claim is pursued and your chances of having your claim approved.

Most plans are covered by ERISA, especially if you are covered as part of your employment.

There are specific procedures outlined for disability claimants when they need to apply for disability benefits and when they must file an appeal for ERISA coverage. That isn’t the case if you have an individual policy because it is a contract between you and the insurance company and falls under state insurance law.  ERISA is a federal law with it's own regulations.

It is important that you keep the differences between ERISA and individual policies in mind when you are buying coverage or if you are needing to file a claim for disability benefits because of a serious injury or illness.

The Differences Between Individual and Group Disability Plans

The most important aspect of any long-term disability plan is how disability is defined by the insurer. Many group plans indicate that the insured is disabled only if they cannot perform any kind of work in the current economy. Some group plans define disability as an inability to perform their current job but the definition changes to say the inability to perform any kind of work after the claim has been active for 24 months. The definition changing means that many workers see their benefits terminated after only 24 months.

And that means you have to appeal that termination and prove you are disabled under the definition of the policy.

Basically, most disability plans have restrictions pertaining to claims that are based on substance abuse, nervous conditions, or mental disorders, allowing payments only for a timeframe ranging from one to two years. If you are considering an individual policy, and you want to make sure you have coverage for anxiety, fibromyalgia, or anxiety or some other conditions, you will need to look for a specific policy that covers those issues.

The Appeals Process

If your ERISA claim is denied, you must exhaust internal appeals before you can file a lawsuit in federal court. This means you must first ask your insurance company to review any decision they have made before you file a lawsuit - that is your appeal, and it's basically your one shot, so you and your lawyer need to do everything you can to make sure all of the evidence goes into that appeal. If you have an individual policy, you don’t have to exhaust administrative appeals before filing legal action. An attorney can help you with the appeals process regardless of which kind of disability coverage that you have.

Frank R. Kearney, Attorney-at-Law
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Experienced DC Workers' Comp, Long Term Disability & Accident Lawyer