Self-Insured Employee Benefit Plans

In the United States, about two-thirds of those not covered by government programs obtain health care coverage through an employer. Employers who offer health benefits may either purchase insurance from a licensed insurer or set up their own plans in accordance with state and federal law. 

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry. The motivation behind ERISA is to provide uniform oversight under a set of national standards for employee benefits. Prior to the passage of ERISA, self-insured employee benefit plans were governed by state insurance law; however, employers complained of the high administrative costs associated with maintaining plans subject to the laws of multiple states. To make the regulation of these plans consistent throughout the country, ERISA pre-empts state laws that 'relate to' employee benefit plans. Whether a law 'relates to' an employee benefit has been a frequent subject in federal court.

In general, ERISA does not cover benefit plans established or maintained by governmental entities, churches for their employees, or plans that are maintained solely to comply with applicable workers compensation, unemployment or disability laws. ERISA also does not cover plans maintained outside the U.S. primarily for the benefit of nonresident aliens or unfunded excess benefit plans.

Under self-insured employee benefit plans, the employer or employer organization funds the plan but may have a Third Party Administrator (TPA) or an insurer provide the provider network, care management services and claims processing. For an insurer, this is referred to as 'Administrative Services Only' or ASO business. This can be confusing to hospitals because it is difficult to tell whether a patient is covered by a fully insured or an ASO plan. This is important because state law and the plan's rule, including payment policies, may vary significantly. between the different types of plans.