Glossary of Terms and Abbreviations (UNDER CONSTRUCTION)
Insurers love to use industry terms and abbreviations in their claim files. Lawyers, you may have noticed, also have a language all their own. Here is a glossary for your use and reference:
Administrator. In the context of insured disability, health care and other employee benefits, a name used for claims representatives who are given authority under the “policy” to determine eligibility for benefits.
Adverse Benefits Determination. This is when the administrator of the “plan” decides that your “claim” is denied or your benefits are terminated. This can be an accurate determination based on the facts in relation to the terms of the plan, an incorrect determination because of a lack of information, reliance on faulty information or the downright operation of a “conflict of interest” affecting the claim decision.
Beneficiary. People that are covered by the “insured plan,” participants in the pension plan, disability or life insurance policy; employees of the company. The term is used because ERISA law utilizes trust law concepts: In a trust there is a trustee that manages or “administers” the trust funds for the “benefit” of the beneficiary.
Benefit. The retirement savings, the health care coverage, the monthly disability payments or life insurance. ERISA benefits must not be confused with government “benefits” or some form of gift or welfare. Disability benefits under ERISA must not be confused with Medicaid or poverty based programs like SSI. ERISA benefits are contributions from earnings, insurance from premiums paid from earnings or employer contributions as a part of employment compensation. Premiums are generally paid from payroll deduction, from pretax earnings.
Burden of Proof. As a Beneficiary/Participant/Claimant, you must show through medical and other “proof” that you are entitled to benefits. This is your “burden.” Do not assume that the Administrator/Insurer/Claim Representative will compile such proof without your input. In many cases they may thwart your efforts to prove your claim. Remember, the trust law model is often untrustworthy. The Administrator has a “conflict of interest.”
Conflict of Interest. Back to the “Trust” model of ERISA plans: You might ask: How can an insurance company or an employer have a “fiduciary” obligation to act in the best interest of a plan beneficiary while, at the same time, pay money or other benefits from its own coffers? Hmmmm. The trust model that is imposed upon ERISA plans is imperfect and subject to abuse by ruthless Administrators that have been shown in a multitude of court filings and settlements to have abused the discretion legally placed upon them to fairly decide benefit claims. In many other cases, Plan Administrators are just biased, but really don’t think they are; they may not be pernicious, they are trained to be cynical. In any case, deciding benefits claims and paying benefits out of one’s own pockets is called a “structural conflict of interest” that the courts are still trying to deal with.
ERISA. Employee Retirement Income Security Act of 1974 is a law enacted by the U.S. Congress with an initial purpose to protect employee benefits. The initial concern was to protect pension plans from corrupt “administrators” and in many cases from the theft or mismanagement of employees’ retirement funds. The legislation was expanded to include all employee benefits including severance pay, disability, health and life insurance. With the exception of severance, these benefits, unlike pension plans are most often insured and therefore “unfunded.” For many reasons, including unclear drafting of the legislation, the need for judicial interpretation to create an enforcement and appeal process absent from the legislation, attempts to reconcile unwieldy concepts and the financial conflicts of interest, especially where an insurance company decides the validity of “claims” and pays those claims. For these and other reasons a federal judge once quipped: “ERISA stands for Everything Ridiculous Imagined Since Adam!”
Fiduciary. A trustee; a position of honesty and trust; the relationship between a trustee and a beneficiary; in the context of an insured employee of an ERISA plan administered by an insurer with a financial conflict of interest, an impossible relationship subject to obvious and proven abuse.
Plan. ERISA law refers to employee benefits as “employee welfare benefit plans. If the “Plan” is “insured” by an insurance company, then the Plan is really the insurance policy that is “written” by the insurer, sold to the employer and offered to employees of the company as important “fringe benefits.” Because the policy is written by the insurer, and the employer rarely reads or understands the all the fine print, “beneficiaries” of the plan are often surprised and disappointed when their “claims” are denied.