When a patient presents with employer-sponsored insurance, the plan may be fully insured or self-funded. The difference is invisible on an insurance card and often absent from the EOB — but it governs which body of law applies to every coverage dispute and appeal. Getting this wrong means filing an appeal under the wrong framework.
Self-funded vs. fully insured
The two plan structures operate under fundamentally different legal regimes:
Fully insured plan
- —Employer buys a policy from a licensed insurance company
- —State insurance law applies: premium taxes, mandated benefits, prompt pay laws, external review requirements
- —Regulated by the state insurance commissioner
- —Often identified by:the payer IS the insurance company (e.g., "Blue Cross of California" as the plan)
Self-funded / self-insured plan
- —Employer bears the insurance risk; pays claims from its own assets
- —Usually administered by a commercial insurer acting as Third Party Administrator (TPA)
- —ERISA (federal law) governs; 29 USC 1144 largely preempts state insurance law
- —Often identified by:EOB says "UnitedHealthcare" as administrator but the plan sponsor is an employer (e.g., "General Motors Medical Plan")
The TPA's name on the EOB can be the same commercial insurer regardless of plan type. The plan documents — specifically the Summary Plan Description (SPD) — state whether the plan is self-funded.
What ERISA preemption means in practice
ERISA Section 514 (29 USC 1144) preempts state laws that "relate to" employee benefit plans. For self-funded plans, the practical effects are significant:
- —State prompt pay laws: generally do not apply. A self-funded plan can take 60, 90, or 120 days to pay a clean claim without violating state prompt pay statutes. ERISA has its own claims procedure rules with different timelines.
- —State external review requirements: generally do not apply. Many self-funded plans are exempt from state external review mandates. The federal external review process may apply to some ERISA plans under ACA rules, but coverage is not universal — check the SPD.
- —State mandated benefit laws: do not apply. The plan is not required to cover services mandated by state law — state-mandated fertility treatments, for example, or state parity requirements that exceed the federal Mental Health Parity and Addiction Equity Act.
- —State balance billing protections: apply only to the extent ERISA does not preempt them — an area with active litigation. Do not assume state balance billing laws protect your patients in ERISA plan contexts without verifying current legal authority.
ERISA appeal rights for physicians
For denied claims under ERISA plans, the appeals process is governed by 29 USC 1133 and 29 CFR 2560.503-1. These rules require:
- 01
180-day window to file an internal appeal
The plan participant (patient) or authorized representative (provider with assignment of benefits) has 180 days from the adverse benefit determination notice to file an internal appeal.
- 02
Full and fair review
The appeal must be reviewed by someone not involved in the original denial — and not a subordinate of the person who made the original decision.
- 03
Right to all relevant documents
The plan must provide all documents, records, and other information relevant to the claim upon request — including the clinical criteria, guidelines, and protocols used in the denial.
- 04
Specific reasons in the final denial
The final internal denial must state the specific reasons for the denial and the plan provisions relied on. A denial that says only 'not medically necessary' without citing the criteria is procedurally deficient.
Physicians who have an assignment of benefits from the patient can file ERISA appeals as authorized representatives. This is how providers directly participate in the ERISA appeals process — the patient's rights to appeal become the provider's rights to exercise.
How to identify an ERISA self-funded plan
The plan type isn't labeled on the insurance card. Use these steps:
- 01Look at the EOB or insurance card — is the plan sponsor an employer rather than the insurer? An EOB from 'UnitedHealthcare, administered on behalf of [Employer Name] Health Plan' signals self-funding.
- 02Ask the patient for their Summary Plan Description. Employers must provide one on request; it will state 'This plan is self-insured' or similar language.
- 03Look for EOB language like 'This plan is administered by [insurer] on behalf of [employer].'
- 04Call the payer's provider relations line and ask directly: 'Is this plan fully insured or self-funded?' They are required to answer.
Medicare Supplement (Medigap) is different
Medigap plans are supplemental insurance policies purchased by Medicare beneficiaries to cover cost-sharing — deductibles, coinsurance, and copays. They are fully insured products regulated by state law, not ERISA plans. Medigap pays secondary after Medicare settles the primary claim; it does not have its own prior authorization requirements for Medicare-covered services. The claims and appeals process follows Medicare's framework, not a commercial insurer's.