Hofstra Labor & Employment Law Journal


Peter K. Stris


Because of an annual tax subsidy that well exceeds $100 billion, most private healthcare expenses in the United States today are covered by employer-sponsored insurance. Like other important employee-welfare benefits, employer-sponsored health insurance is regulated by the Employee Retirement Income Security Act of 1974 (ERISA) - a landmark federal statute whose primary objective was the protection of private-sector retirement savings. A rich scholarly literature has developed which addresses the effects of federal tax and regulatory policy on the structure and performance of our healthcare industry. Within legal academia, however, one issue in particular has engendered much debate: to what extent has ERISA - because of the manner in which its preemption and civil enforcement provisions have been interpreted - created a system in which employees and their beneficiaries receive insufficient protection? Broadly speaking, commentators divide into two camps. One group believes that the status quo is grossly unjust and sadly ironic. In their view, legislation intended to protect employees and their beneficiaries against fiduciary misdeeds is habitually used as a shield by such fiduciaries against liability for negligence and even deliberate wrongdoing. The other group believes that the status quo is the fair result of a sensible legislative compromise. They argue that the current system adequately protects employees and their beneficiaries while, at the same time, maximizing the overall level and quality of welfare benefits offered by employers. This paper addresses one of the most hotly contested questions in that debate: what civil remedies should be available in litigation against a welfare plan and its fiduciaries when a litigant has been injured by the wrongful handling of her benefits claim? Its modest goal is to illustrate that the decade-long conflict that has raged over this question is nothing more than an age-old consequentialist battle over liability rules which, for several often misunderstood reasons, is not amenable to simplistic legislative or judicial resolution.



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