Many consumers are shocked when their insurance company responds to a legitimate claim with "BENEFITS DENIED."

When employees have health or disability insurance through employment, any claims for benefits are covered by a Federal law referred to as the Employee Retirement Income Security Act ("ERISA"). This Federal law allows employers and insurance companies to insert discretionary clauses, which allow the insurance company to interpret the policy and to determine eligibility for benefits within broad discretionary powers which will not be reversed by a Court unless the decision is an abuse of discretion.

Even though Federal law applies, the Federal courts have held that states have the authority to regulate insurance. In regulating insurance, states may prohibit or ban discretionary clauses by appropriate legislation.

When the Federal court reviews these claims, if the Court finds that the denial of benefits is wrong, but reasonable, the Court will uphold the denial of benefits. This is not fair and is not logical. If the decision to deny benefits is wrong, the decision should be reversed and benefits awarded.

Alabama State House Representative Demetrius Newton proposed House Bill 80 to the State Banking and Insurance Commission Committee to prohibit discretionary clauses in insurance policies in Alabama. Retired Federal Judge U.W. Clemon, a judge who has tried many ERISA cases in Federal court has spoken on behalf of the bill.

This bill is good legislation which will help consumers who have insurance through employment.

Legislation forbidding discretionary clauses in insurance policies have passed in 12 states and are supported by AARP and the National Association of Insurance Commissioners.

We are hopeful that our legislature will pass this important legislation which protects consumers. The insurance available to the Legislature and State employees does not include discretionary clauses because government employees are exempt from ERISA. Please contact your Alabama State Representative by clicking here and tell them you are in favor of this legislation.