How health insurers get a free pass to deny coverage from a 52‑year‑old law meant to protect worker pensions

Florence Corcoran, an employee of South Central Bell Telephone Company, was eight months into a high-risk pregnancy when her obstetrician recommended she spend the final month on bed rest in the hospital, for close monitoring. Despite the recommendation, her health insurer determined that it would only cover partial-day at-home nursing care.

While a nurse was off duty, her fetus went into distress and died.

Corcoran sued her insurer, UnitedHealthcare. Because of a little-known law called the Employee Retirement and Income Security Act of 1974, or ERISA, she was unable to recover any money from her insurer due to their wrongful denial. She would see no legal justice following this avoidable tragedy.

Facing health insurance hurdles is an all-too-common American experience. But while courtroom dramas would have many Americans believe that patients can sue to recover money damages when they face wrongful denials, for most people who have employer-sponsored insurance, that is far from the truth. Corcoran's case was decided in 1992 – and the situation is only worse today.

I'm a political scientist studying health insurance barriers and the politics of efforts to reform America's health care system. In my book, "Coverage Denied: How Insurers Drive Inequality in the United States," I traced how health insurance obstacles can upend patients' health and economic lives.

ERISA magnifies those barriers by limiting patients' legal ability to hold health insurers accountable – instead giving them a free pass to keep denying coverage without facing real consequences.

Healthcare rationing by inconvenience

Health insurance hurdles, such as prior authorization and claim denials, are widespread in U.S. healthcare, and the problem is growing.

Americans who have health insurance say prior authorization is the healthcare system's biggest burden, causing administrative headaches while care is kept out of reach. Claim denials hit hard too.

Between 2016 and 2023, claim denials increased from 9% to 12%. In a nationwide survey I conducted in 2024, I found that 36% of Americans experience at least one coverage denial – though usually, it's several.

The denial rate is even higher among people on employer-sponsored insurance, the type of insurance to which ERISA applies.

Denials can be appealed, but doing so demands a level of health insurance literacy and bureaucratic know-how that most people lack. My research shows that less affluent people are less likely to appeal denials in the first place, and sicker patients and those from historically marginalized groups are less likely to prevail even if they do appeal.

Such hurdles effectively create a dynamic that I call "rationing by inconvenience," with red tape impeding meaningful access to care. This drives both health and economic inequities.

When healthcare is kept out of reach, less affluent and Black and Hispanic patients are more likely to postpone care they need, often to the detriment of their health. And they may delay non-medical spending, too, due to unexpected healthcare costs.

ERISA's unintended effects

The sweeping impact of coverage barriers makes it especially important for patients to be able to take effective legal action against insurers. But ERISA strictly limits legal leverage for most people who get health insurance through their employer.

ERISA was crafted in response to widespread public concern about the mismanagement of private pensions, such as with the infamous sudden closure of Studebaker's factory in South Bend, Indiana, in 1963, which left thousands of autoworkers without their pension benefits. By establishing minimum federal standards and regulations for private benefit plans, the law aimed to protect workers' pensions from fraud and mismanagement.

But shortly before Congress voted on the legislation, it added text related to "employee welfare benefit plans," which include health benefits. It seems that lawmakers failed to appreciate that pensions and health benefits might demand different approaches to enforcement.

Unlike with other insurance plans, patients with ERISA-governed plans can't sue an insurer for money damages – to reflect pain and suffering or lost income – when an insurer wrongly denies their care. They can only sue to get the specific treatment covered.

The law mainly affects one type of employer health insurance, called self-insured plans, in which the employer pays employees' medical claims itself rather than buying coverage through an insurer. When ERISA was enacted in 1974, no more than 6% of workers who got health insurance through an employer were covered by a self-funded plan.

Today, 67% of people insured through an employer – roughly 100 million Americans – are in these plans, making the law's defects especially salient.

Driving health inequity

ERISA's constraints on patient protections have far-reaching effects. For one thing, lawyers prefer not to take on cases that don't involve money, making it hard for patients to sue even for the limited benefits to which they would be entitled.

What's more, even if patients are able to sue an insurer, the harms they experienced from wrongful coverage denials still wouldn't be fully addressed – or in some cases, addressed at all.

For a worker suing an employer over a wrongly withheld pension, which ERISA was originally enacted to address, receiving that retained money would restore their loss. But that's not the case for a worker who sues an insurer that denies coverage for their health condition.

Imagine a patient denied coverage for cancer treatment, for example. Even if a court reverses the decision, the patient's condition may have worsened to the point where the treatment is no longer clinically indicated or as effective.

Florence Corcoran experienced this in the extreme: When she lost her fetus at eight months, the only relief to which she was entitled under ERISA was the inpatient monitoring that she no longer required after her pregnancy's tragic conclusion.

ERISA's poor design thus creates a destructive feedback loop that limits Americans' access to healthcare and promotes health and economic disparities. By disincentivizing lawsuits, ERISA makes it virtually costless for insurers to deny coverage for patients' prescribed healthcare.

A block on health reform

In many cases, individual states can pass their own laws to get around congressional gridlock relating to health policy. But ERISA explicitly overrides state laws that relate to self-insured health plans – including consumer protection laws that could potentially protect patients. In doing so, ERISA blocks states from enacting comprehensive health insurance reforms, including those promoting health insurance equity.

Lawmakers have raised this issue over the years, but Congress has not made serious attempts to reform these provisions since the late 1990s' unsuccessful efforts toward a patients' bill of rights. Later healthcare measures, including the Affordable Care Act, have focused on increasing the number of people who have health insurance and largely steered clear of efforts to reduce barriers for the tens of millions enrolled in these plans.

In my view, that is especially unfortunate because at the state level, there is bipartisan appetite to address ongoing health insurance barriers, such as by reforming prior authorization.

For example, California's prior authorization reform bill, SB 1120, passed in 2024 unanimously. The problem is that ERISA prevents laws like SB 1120 from addressing health insurance barriers within the majority of employer-sponsored insurance plans.

Congress could move toward overhauling this outdated law – for example, by allowing states to seek waivers from ERISA's constraints. Without such action, insurers will continue to face relatively little legal risk when they wrongly deny coverage, and patients will continue to bear most of the consequences.

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