Posted by Employer Wellness | Posted in Employer Wellness | Posted on 25-05-2010
It might be easier than you think to eliminate a major reason employees sue.
How? Well, roughly 75% of staff member lawsuits happen because of accidental disconnects between an employer’s internal policies and procedures, and what’s written in the plan documents.
Here are two areas where some the costliest errors lurk, and three steps your fim can take to catch and correct the mistakes before you’re ever sued.
1. Policy/coverage discrepancies
A lot of firms’ written benefits policies and plan documents are like siblings who start to drift apart as they grow up.
In the benefits realm, notwithstanding, the plan sponsor has the “parental” power – and legal responsibility – to make sure written policies and plan documents remain close as they grow and change.
As a routine practice, firms should be sure changes in their benefits policies are also written into the formal plan documents, according to benefits attorney William Wright.
When push comes to shove in court, any inconsistency with plan documents can prove fatal for the business. Example – Executive management passes a new rule that workers must work 30 hours a week to be eligible for the health plan.
Benefits and HR then write the new coverage policy into employees’ benefits handbooks and hold meetings with staff members to explain the change.
Now suppose an staff member drops to part-time status. Are you legally protected if the staff member challenges the loss of benefits?
Not necessarily. for the policy in the handbook to stand up in court, the plan documents must also say there’s a 30-hour-a-week eligibility requirement.
Same thing goes for disputes over run-out coverage. Suppose it’s your firm’s policy to carry over coverage for a terminated staff member during the COBRA election period, but the requirement was never written into the plan document.
A few weeks later, the employee has a major health claim. the TPA denies it, saying coverage had expired. Reason – the plan document says “active employees” are covered, but doesn’t specify that the insurer pay claims until the end of the month.
The likely result – the ex-employee sues, saying the business is liable for the mistake.
2. Coordination of benefits
Watch out for cases where an employee’s claim could be covered under two or more policies (e.g., your firm’s plan and one from a spouse’s company).
Make certain there’s a clear-cut coordination-of-benefits policy in all your plan documents. Usually, if a plan contains no instructions for coordination of benefits, it’s expected to pay first. Two key areas to check –
1. Make sure there’s a statement that says only the amount actually compensated by each plan will be charged against the maximum benefit, and
2. Be sure that the order of benefits determination spells out which plan compensates first for a covered child when the worker is divorced from his or her spouse.
In like fashion, when your firm offers domestic partner coverage, be certain there’s a coordination-of-benefits statement for dependent and non-dependent partners.
Three best practices
On an ongoing basis, you can cut your lawsuit risk by 75 percent if you –
• gather all materials related to specific plans into a binder, including renewal letters from vendors and materials distributed to employees
• perform a yearly self-audit, checking to see if plan-document wording matches your current policies, and
• pay special attention to keeping benefits descriptions up to date.
Reminder – When you don’t have a formal plan document, your contract with the vendor legally serves as the “control document” for the plan. By law, all workers must’ve access to the plan document and be notified in writing of any alterations, including minor ones.