Most people with private insurance are covered by an employer-sponsored health plan.  An employer-sponsored health plan is one that you and your family enroll in through work and to which the employer generally makes a contribution toward the cost of coverage.  Individually purchased coverage is insurance you purchase directly from a health plan or from an association-sponsored health plan, and you pay the entire premium yourself.  Different laws may apply depending on whether you have employer-sponsored coverage or individually purchased coverage, so it is important that you know which type you have.

If you are enrolled in an employer-sponsored health plan, your right to appeal disagreements about benefits through your plan’s internal appeals process is determined by federal law (the Employee Retirement Income Security Act, or ERISA) and a federal ERISA regulation that became effective January 1, 2003.  You may have other rights under your state’s laws if they don’t conflict with the federal requirements.  Whether you have rights under state law for external review will depend on whether your health plan is insured or self-funded.  An employer health plan is insured if the employer purchases health coverage from an insuring organization such as a commercial insurer, a Blue Cross or Blue Shield plan, or an HMO.  An employer health plan is self-funded if the employer pays for the health care costs of its employees directly rather than purchasing insurance from an insuring organization.  

It is sometimes difficult for consumers to know whether their employer-sponsored plan is insured or self-funded.  You may think your coverage is from a health insurance company like CIGNA or Aetna, but if you work for a large employer, those insurance companies may not actually be insuring you.  Instead, they may simply process the claims as a “third-party administrator” for your employer’s self-funded plan.  To find out whether your employer-sponsored plan is self-funded, ask the person who administers the benefits where you work.  You also can look in the Summary Plan Description that you received from your employer when you enrolled, but sometimes the language is ambiguous on this issue, so it is best to ask.  If you can’t find out from your employer or the Summary Plan Description, you can contact the Employee Benefits Security Administration (EBSA), U.S. Department of Labor, which is the agency that enforces ERISA’s provisions.  Either call EBSA at 1-866-444-3272, or find an EBSA regional office at http://www.dol.gov/ebsa/aboutebsa/org_chart.html#section13.

If you are enrolled in an employer-sponsored plan that is insured (your employer purchases insurance from an insuring organization), you have rights under federal and state laws if you have a coverage dispute.  An insured employer health plan must follow federal ERISA regulations for internal plan claims procedures and review of disputed claims (described later in this Guide) and may also be required to follow state rules if they do not conflict with the federal regulations.  Although ERISA prevents some state laws from applying to employer-sponsored health plans that are insured, in a 2002 case the U.S. Supreme Court found that a state could apply its external review law to a claim dispute involving an insured employer-sponsored health plan.  Although this area of law remains somewhat unsettled, consumers should assume that their state’s laws apply unless a court says that they do not.  Section 5 of this Guide will tell you if your state has enacted an external review law and how the program works in your state.

If you are enrolled in an employer-sponsored health plan that is self-funded (the employer pays employee health care costs directly), your source of help will be the health plan’s internal appeals process as required by the federal ERISA regulations (described later in this Guide).  State internal review rules will not apply, and you will not be able to use your state’s external review process.  If you are in a self-funded health plan and are not satisfied with the results of your plan’s internal review process, you may have legal rights that you can pursue in a court of law.  If the dispute is a large one or involves what you consider to be necessary medical care, you may want to consult a lawyer about your legal rights.

If you purchased insurance directly from a health plan or from an association-sponsored health plan (you may have used an agent or an on-line broker to purchase the health plan), your health plan’s procedures and the laws of your state will determine if you can appeal a dispute over benefits using the plan’s internal procedures, and state law will determine whether you can appeal a plan’s decision to a state external review organization.  Most states have laws that provide for internal and external review of disputes over coverage you purchase as an individual.  See Section 5 of this Guide for the rules in your state.

Here’s an easy way to see which regulations apply to these two types of health plans: