How a 52-Year-Old Law Shields Insurers from Accountability

Florence Corcoran was a 52-year-old employee of South Central Bell Telephone Company. She faced a terrifying medical crisis while eight months pregnant with a high-risk pregnancy. Her obstetrician recommended immediate bed rest in a hospital for the final month of her pregnancy. The doctor’s goal was close medical monitoring to ensure the safety of both the mother and the unborn child.

Despite this urgent recommendation, her health insurer, UnitedHealthcare, made a different decision. The insurance company determined that it would only cover partial-day at-home nursing care. UnitedHealthcare refused to pay for the inpatient hospital stay that the doctor had ordered. This decision had tragic consequences. While a nurse was off duty during the home care arrangement, Corcoran’s fetus went into distress and died. The loss was entirely preventable had she received the recommended level of care.

Corcoran subsequently sued her insurer for the wrongful denial of coverage. However, she was unable to recover any monetary compensation from UnitedHealthcare. This was due to a little-known federal statute called the Employee Retirement Income Security Act of 1974, or ERISA. The law granted the insurer a legal free pass. Consequently, Corcoran received no legal justice following this devastating tragedy. Her case was decided in 1992, yet the situation has become even more severe in the decades since.

Facing health insurance hurdles is an all-too-common American experience. While courtroom dramas in television and film might lead many Americans to believe that patients can successfully sue to recover money damages when they face wrongful coverage denials, this is far from the truth. Most people who have employer-sponsored insurance are legally barred from seeking financial compensation.

As a political scientist studying health insurance barriers, I have traced how these obstacles upend patients’ health and economic lives in my book, “Coverage Denied: How Insurers Drive Inequality in the United States.” ERISA magnifies these barriers by limiting patients’ legal ability to hold health insurers accountable. This effectively allows companies to keep denying coverage without facing real consequences.

Health insurance hurdles, such as prior authorization requirements and claim denials, are widespread in the U.S. healthcare system. The problem is growing. Americans who possess health insurance consistently identify prior authorization as the biggest burden in the system. This process causes significant administrative headaches while keeping necessary care out of reach. Claim denials hit patients hard as well. 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. For most patients, the number of denials is usually several.

The denial rate is even higher among people on employer-sponsored insurance, the specific type of insurance to which ERISA applies. While denials can be appealed, the process 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. Furthermore, 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.” This occurs when red tape impedes meaningful access to care. This dynamic drives both health and economic inequities.

When healthcare is kept out of reach, less affluent, Black, and Hispanic patients are more likely to postpone care they need. This often harms their health. They may also delay non-medical spending due to unexpected healthcare costs and financial uncertainty. This systemic friction disproportionately harms vulnerable populations.

The sweeping impact of coverage barriers makes it especially important for patients to be able to take effective legal action against insurers. However, ERISA strictly limits legal leverage for most people who get health insurance through their employer. The law was crafted in response to widespread public concern about the mismanagement of private pensions.

A prominent example was the sudden closure of Studebaker’s factory in South Bend, Indiana, in 1963. This event 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 cannot sue an insurer for money damages. They cannot seek compensation for 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 these plans, the employer pays employees’ medical claims itself rather than buying coverage through an outside 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. This shift makes the law’s defects especially salient in modern healthcare.

ERISA’s constraints on patient protections have far-reaching effects. For one thing, lawyers prefer not to take on cases that do not involve money. This makes 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 would not be fully addressed.

For a worker suing an employer over a wrongly withheld pension, receiving that retained money would restore their loss. But that is not the case for a worker who sues an insurer that denies coverage for their health condition. Consider a patient denied coverage for cancer treatment. 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. Time is a critical factor in medicine, and legal delays can cause irreversible harm.

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. The law offered a remedy for a problem that could not be undone. ERISA’s poor design thus creates a destructive feedback loop that limits Americans’ access to healthcare. It promotes health and economic disparities. By disincentivizing lawsuits, ERISA makes it virtually costless for insurers to deny coverage for patients’ prescribed healthcare.

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. They have 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. This includes 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. One possible path would be to allow 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. Patients will continue to bear most of the consequences. The current legal framework prioritizes corporate liability protection over patient rights. This leaves millions of Americans vulnerable to the denial of essential care.