What Is a Self-Funded Plan
A self-funded plan is an employer health insurance arrangement where the company directly pays employee medical claims from its own funds rather than purchasing a policy from an insurance carrier. The employer assumes the financial risk of claims and typically hires a third-party administrator (TPA) to process claims, handle appeals, and manage day-to-day operations.
Approximately 61% of covered workers in the U.S. are enrolled in self-funded plans, making this structure far more common than fully insured plans. This matters significantly for your insurance appeals because self-funded plans are governed by different rules than traditional insurance policies.
Why It Matters for Your Denied Claims
When your claim gets denied, the entity making the decision differs based on your plan type. In a self-funded plan, your employer is technically the decision-maker, even if a third-party administrator handles the paperwork. This distinction shapes your appeal rights and options.
Self-funded plans fall under the Employee Retirement Income Security Act (ERISA), which sets strict timelines for appeals but limits your legal remedies compared to state insurance regulations. You have 30 days from receiving an Explanation of Benefits (EOB) to file an internal appeal, and the plan must respond within 30 days. If you're denied again, you cannot appeal to your state insurance commissioner. Your only recourse is federal court litigation, which is expensive and time-consuming.
By contrast, fully insured plans answer to state insurance departments, which often provide free external appeal processes and additional protections.
Key Processes and Timelines
- Internal appeals: You have 30 calendar days from the EOB denial date to request reconsideration. The plan has 30 days to respond (or 72 hours for urgent denials related to ongoing treatment).
- Medical necessity determination: Self-funded plans must base denials on the plan document and medical necessity standards. Request the specific language they used to deny your claim and challenge it with peer-reviewed medical literature supporting your treatment.
- Prior authorization requirements: If your plan requires prior authorization and you received treatment without it, the denial may be overturnable if the procedure was medically necessary. Push back on procedural denials separately from medical necessity denials.
- Third-party administrator involvement: Ask your HR department who administers claims. Common TPAs include Aetna, UnitedHealth, and Cigna. Request direct contact information for appeals, as TPAs sometimes delay forwarding appeal requests to the actual plan.
- Plan document review: Request a copy of your plan document and summary of benefits and coverage (SBC). Self-funded plans often have different exclusion language than standard insurance products.
Common Questions
- Can I go to an external appeal if my internal appeal is denied? Not typically. Self-funded ERISA plans do not have access to state external review processes. Only fully insured plans offer this. Your options are limited to requesting reconsideration or filing a federal lawsuit, which requires an attorney.
- Does my employer actually review my appeal, or just the TPA? The TPA reviews it first, but your employer (the plan sponsor) maintains final decision authority. You can request escalation to the employer's benefits administrator or appeals committee if you believe the TPA made an error.
- How do I know if my plan is self-funded? Check your Summary of Benefits and Coverage (SBC) or call your HR department directly. Look for language stating the employer "assumes the risk" or "pays claims directly." If you see an insurance company name like Blue Cross, it may still be self-funded; the company name refers only to the TPA, not the plan structure.
Related Concepts
- ERISA: The federal law governing self-funded plans and your appeal rights
- Plan Document: The contract defining what your self-funded plan covers and denies