Converting employer-sponsored health coverage to individual policies may be riskier for health insurers than simply selling continuation coverage.
The 9th U.S. Circuit Court of Appeals has ruled that the federal Employer Retirement Income Security Act limits suits against carriers that sell continuation coverage, but not against carriers that sell converted policies.
“The contract under the converted policy is directly between the insurer and the insured,” Circuit Judge William Fletcher writes for a three-judge panel that heard an ERISA case, Barbara Waks vs. Empire Blue Cross/Blue Shield, in San Francisco.
“Whenever an individual has exercised her right to convert from a group policy under an ERISA plan to an individual policy, the new policy is no longer regulated by ERISA, and state-law claims under that policy are not preempted by ERISA,” Fletcher writes.
The plaintiff in the case, Barbara Waks, is suing Empire Blue Cross and Blue Shield, New York, over its refusal to cover a 1996 emergency room visit.
The 9th Circuit ruling deals only with ERISA. The court comes to no conclusions about the facts of the case.
The ruling reverses an earlier decision by a U.S. District Court in Nevada, which found that ERISA does protect issuers of converted policies as well as providers of continuation coverage.