How to Insure Your Income: 24-Hour Coverage Problems
The different benefit structure under workers' comp programs and traditional health insurance raises a number of institutional barriers to combining the two coverages. Under workers' comp, medical benefits are unlimited; health insurance has all kinds of limits -- deductibles, copayments and maximum dollar limits.
In most states, the different types of coverage are protected by different guaranty funds -- workers' comp by a property and casualty guaranty fund and group health by a life and health guaranty fund.
Once again, many of the potential efficiencies and cost savings from blending the two types of coverage into a single contract would be lost if it remained necessary to keep separate statistics of claims and administrative expenses for rating purposes, reporting purposes and assessments made by guaranty associations.
Finally, there are a few potential regulatory barriers arising out of the manner in which workers' comp is regulated and administered. Usually, the insurance department regulates policy forms and rating systems. An industrial accident board or commission actually oversees the delivery of benefits, resolves disputes between employees and employers, and gathers data about occupational injuries and diseases.
With 24-hour coverage, there could be a considerable savings in legal costs if it were no longer necessary to determine whether every claim is work-related or not. However, the state must decide whether it needs this information, and how the rating process will be affected by 24-hour coverage.
Perhaps the most significant barrier to implementation of 24-hour coverage proposals is a potential conflict with provisions of the federal Employee Retirement Income Security Act of 1974 (ERISA).
ERISA regulations apply to retirement plans and also to "employee welfare benefit plans" (such as any plan of group medical, surgical, hospital or other health care benefits and group accident, sickness and disability benefit plans). An employer is not required to provide employee welfare benefits -- but when he or she does, those benefits become subject to ERISA regulation under federal law.
ERISA includes an exemption for any plan maintained solely for the purpose of complying with workers' comp, unemployment compensation or disability insurance laws. The problem is that as soon as workers' compensation benefits and nonoccupational health insurance benefits are combined in a 24-hour coverage plan, the plan no longer exists solely to comply with workers' compensation laws. Thus, the ERISA exemption would no longer apply, and the plan becomes subject to federal regulation. State insurance departments therefore are concerned that they could lose their authority to regulate the workers' compensation portion of 24hour coverage plans.
Some court cases have upheld the right of states to continue to enforce the traditional areas of workers' comp and disability insurance laws, and have said that ERISA does not necessarily pre-empt state law. However, the potential conflict between state jurisdiction and federal jurisdiction opens the door for employers and others to challenge state regulation of 24-hour coverage products on a case-by-case basis. It may take an amendment of the federal law to eliminate the conflict, or further clarification by the courts to firmly establish an exemption for workers' compensation benefits in 24-hour coverage plans.
