Posted by Company Wellness | Posted in Company Wellness, Wellness Programs | Posted on 01-12-2010
It may be easier than you think to eliminate a major reason workforce sue.
How? Well, roughly 75 percent of worker lawsuits happen because of accidental disconnects between an business’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
Many firms’ written benefits policies and plan documents are like siblings who begin to drift apart as they grow up.
In the benefits realm, nonetheless, the plan sponsor has the “parental” power – and legal responsibility – to make certain written policies and plan documents remain close as they grow and change.
As a routine practice, firms should make sure changes in their benefits policies are also written into the formal plan documents, according to benefits attorney William Wright.
If push comes to shove in court, any inconsistency with plan documents can prove fatal for the corporation. Example – Senior level management passes a new rule that staff 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 workforce 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 cancelled employee 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 corporation is liable for the mistake.
2. Coordination of benefits
Watch out for cases where an employee’s claim may be covered under two or more policies (e.g., your firm’s plan and one from a spouse’s company).
Make sure there’s a clear-cut coordination-of-benefits policy in all of your plan documents. Generally, when a plan contains no instructions for coordination of benefits, it’s expected to pay first. Two key areas to check –
1. Make certain there’s a statement that says only the amount actually paid by each plan will be charged against the maximum benefit, and
2. Make sure that the order of benefits determination spells out which plan compensates first for a covered child if the employee is divorced from his or her spouse.
Similarly, when your firm offers domestic partner coverage, make certain there’s a coordination-of-benefits statement for dependent and non-dependent partners.
Three best practices
On an ongoing basis, you are able to 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 each year self-audit, checking to see when plan-document wording matches your current policies, and
• pay special attention to keeping benefits descriptions up to date.
Reminder – If 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 have access to the plan document and be notified in writing of any alterations, including minor ones.