Regulation of Self-Funded Health Insurance Plans
Part 2, Chapter 6: Self-funded Plans Page 2
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Second, self-funded plans are regulated under ERISA (the federal Employee Retirement Income Security Act) in terms of benefit-related issues, and are generally exempt from state laws and regulations related to benefits. In many cases, self-funded plans appear to offer benefits that are equal to -- or more comprehensive than -- traditional health insurance policies or managed care plans. However, the exemption from state laws and regulations in relation to benefits makes it important to carefully review the plan provisions to ensure that you understand the benefits and limitations.
The fact that self-funded plans are regulated under federal law in terms of benefit-related issues also affects the appeals process. For example, in the case of a decision made by a traditional insurer or a managed care plan dealing with claims or benefits, the first step in the appeals process is to file an appeal with the insurer or the managed care plan itself. Once those appeals have been exhausted, further appeals can be filed with the state Department of Insurance or the state Department of Health, or with other organizations.
However, in the case of a decision made by a self-funded plan, the first step in the appeals process is to file an appeal with the plan administrator or the plan sponsor. Once appeals to the plan administrator and plan sponsor have been exhausted, further appeals should be filed with the Pension and Welfare Benefits Administration of the United States Department of Labor (See Appendix B). If those appeals are unsuccessful, the next step may be to consult an attorney.
Third, the money used to pay claims in a self-funded plan generally comes from the plan sponsor -- the corporation, union, association, or government agency -- rather than from an insurance company. In order to cover unexpectedly high medical claims, some self-funded plans may make use of reinsurance programs. Reinsurance provides coverage for claims above a pre-set amount. (See Table 13 for a comparison of self-funded plans and traditional health insurance plans.)
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