The Likes of Sedgwick, Reed Group, Cigna, or Aetna Can Have a Conflict of Interest When Acting as a Third-Party ERISA Claims Administrator

Many large companies offer employees “self-insured” or “self-funded” ERISA plans to provide disability insurance or health insurance benefits. However, these companies are not in the business of administering health or disability claims. This makes sense. Boeing doesn’t know how to evaluate a short term disability claim. Intel isn’t in the long term disability business. AT&T doesn’t know how to read medical billing codes. So, instead of trying to do this itself, most companies hire other companies to administer the disability or health insurance claims. These “third-party” companies are either in the business of administering ERISA benefit plans (e.g. Sedgwick and Reed Group) or are already administering these types of claims because they offer medical or disability insurance themselves (e.g. Cigna and Aetna). In theory, a benefit of this structure is that the entity making the claims decision is not the same entity that…

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