One of these reasons is that DOL (Department of Labor) audits often accompany requests for insurance company booklets for the purpose of scrutinizing all of the legal language required for ERISA compliancy. These booklets or certificates often do not include all of the legally required language mandated by ERISA and HIPAA, such as detailed claims procedures, plan sponsor information, HIPAA privacy rights, GINA provisions, ERISA rights provisions and others. A Wrap Plan simply eliminates this problem altogether. The Wrap Plan works with the booklet/certificate to ensure that you are your client are fully compliant with ERISA and HIPAA.
ERISA requires that all plan sponsors develop a summary plan description (SPD) that communicates with employees what types of benefits are available to them, what the eligibility requirements are, how to receive these benefits and whom to contact when a problem or question arises. Many companies make the mistake of believing that the coverage booklet they receive from their health insurance provider meets the DOL’s requirements for an SPD. In fact, the majority of the booklets that are provided from the major insurance companies are NOT compliant. While these booklets provide important information, they do not address all the information required by ERISA. If a company is currently just using its health provider booklet as an SPD, then the company is not in compliance.
A company can rectify the situation by creating a Wrap Plan to attach to the provider’s benefits booklet, provided the benefit booklet includes specific benefit descriptions and limitations. A clear and comprehensive wrap document will make the company compliant and can protect it from lawsuits.
When creating a wrap document, ERISA mandates that the content include the following information that is not in the provider’s benefits booklet: the official plan name; the name and address of administrator and plan sponsor; the names and addresses of people on whom legal process may be served; whether records are kept on a calendar-, policy- or fiscal-year basis; date of the end of the plan year; employer tax-identification number; plan number; plan sponsor’s authority under the plan to eliminate benefits or terminate the plan; COBRA rights and obligations of participants and beneficiaries; type of plan the SPD describes (for example, the group health plan); the name, title and address of the plan; description of relevant provisions of any application collective bargaining agreement; source of financing for the plan; claim procedures; ERISA rights statement; name of organization through which benefits are provided; and the funding medium (fully insured, self-funded, etc.).
As you can see, there is a mass amount of information that must be included under the law that the plan booklets simply do not address. Please let me know if this description helps you to understand why a Wrap Plan is 100% necessary under the law. Thanks!