Reviewed Jul 11, 2026 · maintained by Erin Rose · general reference, not legal advice
Why the plan type is the master switch
ERISA's deemer clause (29 U.S.C. §1144(b)(2)(B)) removes self-funded employer plans from state insurance regulation. So a state's prompt-pay deadline, gold-card exemption, or recoupment lookback typically does not apply to a self-funded plan — and per the KFF 2024 Employer Health Benefits Survey, 63% of covered workers (79% at large firms) are in self-funded plans.
Fully-insured plans are issued and risk-borne by a carrier and are state-regulated, so those laws do apply. Confirm the plan type before you rely on any state law below — filing a self-funded dispute with the state insurance department is a common, costly misroute.
How to tell if a plan is self-funded
The carrier name on the card is not the answer — a carrier often just administers a self-funded plan (an ASO or TPA arrangement). Look for these tells:
- The member ID card carries no state "regulated by" marker, and the plan is "administered by" the carrier rather than insured by it.
- A third-party administrator (TPA) processes claims on behalf of the employer's plan.
- The Summary Plan Description states the employer or plan bears the financial risk for claims.
- The state insurance department declines jurisdiction and points you to the U.S. Department of Labor / EBSA — that means it is an ERISA self-funded plan.
- Level-funded plans are a trap. They are legally self-funded (ERISA) but bundled with stop-loss and a fixed monthly cost so they look fully-insured. Read the SPD, not the logo.
Which rulebook governs each lever
Once you know the plan type, the same dispute follows a different path. Government programs (Medicare, Medicaid) run on their own ladders regardless.
| Lever | Fully-insured (state-regulated) | Self-funded (ERISA) |
|---|---|---|
| Prior-auth exemption (gold-card) | State gold-card law may apply | Not reached by state law |
| Prompt-pay / interest | State prompt-pay deadline & interest apply | Generally preempted (circuit-split at the edges) |
| Recoupment lookback limit | State clawback window applies | Not reached; the offset is still an ERISA adverse determination |
| Appeals & external review | Internal appeal → state DOI external review | Federal internal appeal → federal external review (HHS-administered or a DOL-compliant private IRO) |
| Where to escalate | State department of insurance | U.S. Dept. of Labor / EBSA |
Self-funded does not mean no rights
A self-funded plan is out of reach of state law, but a federal floor still applies to the patient (and to you as an authorized representative):
The ERISA claims-procedure rule (29 CFR 2560.503-1) requires a full and fair internal appeal and a free copy of the claim file, including the guidelines used to deny. The Affordable Care Act layers internal and external review onto non-grandfathered self-funded plans (45 CFR 147.136), through a federal external-review process — either the HHS-administered process or a DOL-compliant private IRO — rather than the state route fully-insured plans use. And the No Surprises Act adds federal balance-billing protections and independent dispute resolution. So the protections are federal, not state — but they are real, and even a recoupment offset against a self-funded plan is an "adverse benefit determination" that triggers the 503-1 process.
The law behind it, briefly
29 U.S.C. §1144 is the whole game: its preemption clause (a) sweeps aside state laws that "relate to" employee benefit plans; its savings clause (b)(2)(A) preserves state laws that regulate insurance; and its deemer clause (b)(2)(B) then says a self-funded plan cannot be "deemed" an insurer — so the savings clause can't reach it. In FMC Corp. v. Holliday (1990) the Supreme Court drew the bright line: state insurance laws apply to fully-insured plans and not to self-funded ones. More recently, Rutledge v. PCMA (2020) confirmed states can still regulate the cost of benefits (there, PBM drug reimbursement) without being preempted — so the frontier keeps moving, which is why every state-law page here is dated and links back to this one.
Frequently asked
- How can I tell if a patient's plan is self-funded or fully-insured?
- Check the member ID card and Summary Plan Description. Self-funded (ERISA) plans usually show a TPA with "administered by" language, no state regulation marker, and an SPD stating the employer bears the risk. Fully-insured plans are issued by a carrier that bears the risk and are state-regulated. If the state insurance department declines jurisdiction, it is a self-funded plan governed by federal ERISA rules.
- Do state prompt-pay, gold-card, and recoupment laws apply to self-funded plans?
- Generally no — ERISA's deemer clause removes self-funded plans from state insurance regulation, so state prompt-pay, gold-card, and recoupment statutes usually do not reach them. Fully-insured plans are state-regulated and those laws do apply. Some edges vary by federal circuit, so confirm the plan type first.
- Does self-funded mean the patient has no appeal rights?
- No. Self-funded ERISA plans must follow the federal claims-procedure rule (29 CFR 2560.503-1) — a full and fair internal appeal plus a free claim file — and the ACA adds internal and external review through a federal (HHS-administered) process. The protections are federal, not state, but they exist.
- What is a level-funded plan?
- Legally self-funded (ERISA), but bundled with stop-loss and a fixed monthly payment so it resembles a fully-insured plan. Because it is self-funded, state insurance laws generally do not apply. Confirm from the SPD, not the carrier logo.
Related references
Know the rules — now put a number on the claim
Once you've confirmed which laws reach the plan, CareCost estimates the patient's out-of-pocket and your expected reimbursement for any specialty drug — in about 30 seconds.
Try the cost estimator →Sources & how this is maintained
- Primary sources
- 29 U.S.C. §1144 (ERISA preemption / savings / deemer); FMC Corp. v. Holliday, 498 U.S. 52 (1990); Rutledge v. PCMA, 592 U.S. 80 (2020); 29 CFR 2560.503-1; 45 CFR 147.136; No Surprises Act; KFF 2024 Employer Health Benefits Survey (self-funded enrollment).
- Maintained by
- Erin Rose, Founder, under CareCost's methodology and editorial policy. Corrections are logged on the Corrections page.
- Not legal advice
- This is general reference for billing and patient-access staff, not legal advice. ERISA preemption has evolving edges and circuit splits; confirm the plan type and the controlling rule for your patient's situation, and consult counsel for a specific dispute.
- Spotted an error?
- Email editorial@carecostestimate.com.