ERISA preempts (that is, overrides) many state laws that regulate employee benefit plans. Simply put, if you obtain your health insurance, life insurance, or disability insurance through a plan set up by your employer, ERISA probably applies. If it does, your rights are dramatically limited.
As a practical matter, this means that when ERISA applies, there is no economic incentive for the plan to provide the benefits that have been promised. If the plan refuses, and the member sues, the worst thing that happens to the plan is that a court may order it to do what it was supposed to do in the first place. In other words, it pays what it owes. There is no additional penalty. This is like limiting the penalty for bank robbery to making the bank robber give back the money.
The absence of any right to compensatory damages can lead to tragic cases. In one, the plan refused to allow a member to undergo necessary treatment for cancer, even though it was covered. The member went through the plan’s various appeal processes, and the plan eventually relented and agreed to authorize treatment. But by then, it was too late, and the window of opportunity for the treatment to be effective had passed. The plan member died shortly after that.
When her family sued the plan, the court dismissed the case under ERISA, finding that there was no remedy available. Because the member was dead, there was no way to award her the plan benefits she was originally entitled to (the medical treatment) – which is the only remedy allowed. There is no remedy for emotional distress, or wrongful death. In effect, ERISA allows plans to kill their members with impunity.