Senate Examines ERISA's Grip on Disability Claims
Author: Ian C. Langtree - Writer/Editor for Disabled World (DW)
Published: 2010/09/29 - Updated: 2026/01/11
Publication Type: Informative
Category Topic: Insurance - Related Publications
Page Content: Synopsis - Introduction - Main - Insights, Updates
Synopsis: This report examines a 2010 U.S. Senate Finance Committee hearing, chaired by Senator Max Baucus, which investigated significant issues with private long-term disability insurance plans. It details how workers often face challenges in securing entitled benefits due to complex claims processes, denials, and delays by insurance companies. The hearing highlighted testimonies from affected individuals and experts, shedding light on systemic flaws and the need for reform to protect vulnerable populations. Its authority stems from direct references to Senate proceedings and expert insights, making it a valuable resource for people with disabilities, seniors, or those navigating disability insurance claims. The clear, detailed reporting offers practical understanding of the obstacles and potential advocacy paths, useful for anyone seeking to address or prevent insurance disputes - Disabled World (DW).
- Definition: Employee Retirement Income Security Act (ERISA)
ERISA, the Employee Retirement Income Security Act of 1974, is federal legislation that governs most employer-sponsored benefit plans in the United States, including pension plans, health insurance, and disability coverage. Congress passed this law to protect workers after several high-profile cases where employees lost their promised retirement benefits due to corporate mismanagement and fraud. The law sets minimum standards for these plans, requires detailed disclosure of plan information to participants, establishes fiduciary responsibilities for those who manage plan assets, and creates a uniform system of enforcement through federal courts rather than state courts. What makes ERISA particularly significant for people with disabilities is that it preempts state insurance laws, meaning workers who receive benefits through their employer face different rules and often fewer protections than those who buy individual policies. Under ERISA, claimants cannot sue for punitive damages, cannot demand a jury trial, and must exhaust the plan's internal appeal process before going to court - restrictions that have made these cases notoriously difficult to win without experienced legal representation.
Introduction
The U.S. Senate's Finance Committee dug into the business of long-term disability insurance with a hearing, at which an industry representative defended the current system and critics claimed it isn't working.
Main Content
The Employee Retirement Income Security Act regulates this area, and Mark D. DeBofsky, an attorney and law professor at John Marshall Law School, testified at the hearing that ERISA has betrayed its original goals.
"Contrary to the clearly expressed legislative intent, the courts have transformed ERISA into a shield that protects insurance companies from having to face the consequences of unprincipled benefit denials and other breaches of fiduciary duty," DeBofsky told the committee. Court practices in disability disputes give deference to insurers, he said.
"The current framework of federal and state consumer protections affords the all-important balance of providing a reasonable cost of coverage and appropriate handling of claims," said Paul Graham, senior vice president for insurance regulation and chief actuary at the American Council of Life Insurers.
In Graham's testimony, he pointed out that a recent industry study indicated 78.8% of submitted claims were approved. ACLI also explained that less than 1% of claims are appealed to the federal courts.
The committee's chairman, Sen. Max Baucus, D-Mont., wasn't satisfied with the industry position.
"This has been kind of a disturbing hearing, frankly," said Baucus. "There's clearly a huge problem here... We've got a lot of work ahead of us." He said he would be consulting with the health committee on the topic. "This is not good. And I just very much hope that we could find a better solution."
DeBofsky asked the committee to reform the system, allowing jury trials with witnesses and evidence and the potential for damages in cases of long-withheld benefits. Allowing such a system would not produce a "legitimate fear of markedly increased costs," according to his testimony.
"The only available actuarial study on this issue reveals that potential cost increases resulting from the elimination of insurer discretion would lead to at most a modest 4% rise in premiums." And he added that "such changes can help rebuild public confidence in insurance companies that have, for too long, been able to hide behind legislative shields and judicial protections that no other industry receives."
Answering arguments that the companies have too much power, and an independent review should be installed, Graham said these claims examinations require layers of expertise provided by experienced staff looking at all aspects of a claim.
"Insurers have that expertise at their disposal," he said, though he granted it is difficult to ensure a bias-free approach. "No matter how it's structured, it's impossible to remove all bias from the system," he said.
At the hearing, Senior U.S. District Court Judge William M. Acker Jr,. of the Northern District of Alabama, talked about the confusion under ERISA and the difficulty of working with these cases.
"ERISA jurisprudence will stay as messed up as it is unless Congress reworks it," he argued in his testimony. "The courts have not rescued ERISA and cannot be expected to do so."
ACLI officials are unsure what will come of this examination of disability insurance.
"We definitely are interested to see where the committee is going to go as a result of the hearing," said Alane Dent, a vice president for federal relations at ACLI, who pointed out the challenge of digging into the massive ERISA to change its disability provisions. "Looking at ERISA is a much bigger proposition," she said. "Any attempts to change ERISA really need to be done with a broader understanding of the potential impact it would have on benefit plans at large."
Insights, Analysis, and Developments
Editorial Note: The Senate's 2010 inquiry into disability insurance exposes a troubling gap between policy intent and real-world outcomes, where bureaucratic hurdles and corporate practices often leave the most vulnerable without support. While the hearing was a critical step toward accountability, it underscores an ongoing need for legislative action to streamline claims processes and enforce fair treatment. For people with disabilities and seniors, this issue remains a pressing concern, as access to timely benefits can mean the difference between stability and hardship. Policymakers and advocates must build on these discussions, prioritizing reforms that place human dignity and equity at the forefront of the insurance system - Disabled World (DW).
Author Credentials: Ian is the founder and Editor-in-Chief of Disabled World, a leading resource for news and information on disability issues. With a global perspective shaped by years of travel and lived experience, Ian is a committed proponent of the Social Model of Disability-a transformative framework developed by disabled activists in the 1970s that emphasizes dismantling societal barriers rather than focusing solely on individual impairments. His work reflects a deep commitment to disability rights, accessibility, and social inclusion. To learn more about Ian's background, expertise, and accomplishments, visit his full biography.