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Self Insurance Complaints

What is a self-insured health plan?

A self-insured group health plan (or a "self-funded" plan as it is also called) is one in which the employer assumes the financial risk for providing health care benefits to its employees. In practical terms, self-insured employers pay for each c,aim out of pocket as they are incurred instead of paying a fixed premium to an insurance carrier, which is known as a fully-insured plan.
Self-insured plans are set up by employers to pay the health claims of its employees. The employer sets aside funds for the health claims. The employer assumes the risk of providing the benefits and is obligated to pay all the claims. Sometimes self-insured plans are confused with fully insured plans because employers often hire an insurance company to pay the claims. If you do not know what kind of plan you have ask your employer or plan administrator. Federal laws enforced by the U.S. Department of Labor govern legitimate self-insured plans.

States are not allowed to regulate these plans. This means that state laws requiring specific benefits in health care plans do not apply to self-insured plans. Beware that some fraudulent health plans may be described or offered as "self-insured" when, in fact, they are operating without state or federal approval. If a health insurance policy seems too good to be true, be careful.

What kind of health plan do you have?

If you have health insurance through your employer, you can find what you need to know about the plan by reading your benefits handbook. Then, if you are still not sure, ask the people who work in your human resources or union benefits office.

Self-insured employer plans

Many people aren't sure whether the health plan they have through their employer is fully insured or self-insured. But if you work for a large company or government, there's a chance your health plan is self-insured.

These self-funded plans are not insurance. The employer pays employee health care costs from the employer's own pocket.

That's why these self-funded plans tend to work best for companies that are large enough to offer good coverage and pay large claims for expensive medical services. A self-insured plan may seem just like traditional insurance to you, but it does not always work the same way. And the differences can be important.

Of course, as long as claims are being paid you may not notice whether your employer is fully insured or self-funded.

Find out how your health plan works

All self-insured employer plans do not work exactly the same way. Your plan's details are explained in your benefits handbook. It's your right and responsibility to know how your plan works so read your handbook.

Self-insured employers & TPAs

It is common for self-insured plans to turn over the administration of their health plans to a Third Party Administrator (TPA). The TPA handles all administrative tasks including claims processing and payments.

  • Often the employer can contract with an insurance company to act as a TPA for all health care claims. This can disguise the facts if your plan is self-funded.

  • The names of both the TPA and employer appear on the benefits handbook and claim forms just as if the TPA were actually your insurance company.

  • A self-funded employer takes on the roles the insurance company usually plays. These roles can include paying claims, deciding on benefits, and determining which claims to pay.

  • TPAs simply follow the employer's orders.

Why do employers self fund their health plans?

There are several reasons why employers choose the self-insurance option. The following are the most common reasons:

  • The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a "one-size-fits-all" insurance policy.

  • The employer maintains control over the health plan reserves, enabling maximization of interest income income that would be otherwise generated by an insurance carrier through the investment of premium dollars.

  • The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.

  • The employer is not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA).

  • The employer is not subject to state health insurance premium taxes, which are generally 2-3% of the premium's dollar value.

  • The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.

If your claim is denied

Self-funded plans usually have an internal process to review claim denials. You must complete that process before seeking outside help. The process is explained in your health benefits handbook.

What you can do
  • Read and make sure you understand your benefits handbook.

  • Your company's benefits manager can help if you need to file a claim for payment. Then, if the claim is denied, you should request that the denial be reviewed.

  • Are you in a labor union? The union can file a grievance for you, investigate the employer's financial status, and help you negotiate payments on your past medical bills.

  • If you are still not satisfied, file a complaint with the U.S. Department of Labor. That federal agency investigates complaints about self-funded employers.

  • Consider legal assistance as another resort. The company may have violated an implied contract by refusing to pay medical bills which came about while self-insured health benefits were being offered.

The U.S. Department of Labor investigates consumer complaints about self-insured employer plans

Most self-insured health plans fall under the Employee Retirement Income Security Act (ERISA). ERISA is federal law that is enforced by the U.S. Department of Labor, Employee Benefits Security Administration (DOL-EBSA). If you are a member of a self-insured health plan through your employer security or union, then you can contact the DOL-EBSA for assistance.

However, the DOL-EBSA does not regulate self-insured health plans that are sponsored through school districts, other municipalities, and churches. If you are a member of this type of plan, you can file a complaint with the plan directly or you may seek a legal remedy through a court of law.

The DOL-EBSA is available to answer questions about self-insured employer plans that come under ERISA regulation. You can gain information on the type of plan that you participate in by contacting your employer or union. If there is still some question, then you can contact the DOL-EBSA for clarification.

How to contact the U.S. Department of Labor:

Employee Benefits Security Administration
Kansas City Regional Office
2300 Main St, Suite 1100
Kansas City, MO 64108

(816) 426-5131 Tel.
(816) 285-1888 Fax
(866) 444-3272 (toll free)
Department of Labor web site

With what laws must self-insured group health plans comply?

Self-insured group health plans come under all applicable federal laws, including the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), Consolidated Omnibus Budget Reconciliation Act (COBRA), the Americans with Disabilities Act (ADA), the Pregnancy Discrimination Act, the Age Discrimination in Employment Act, the Civil Rights Act, and various budget reconciliation acts such as Tax Equity and Fiscal Responsibility Act (TEFRA), Deficit Reduction Act (DEFRA), and Economic Recovery Tax Act (ERTA).