At face value, it seems logical that insurance companies are responsible for paying health benefit claims. But are they?
Determining the entity responsible for paying claims requires an understanding of how health benefit plans are structured and governed. In the US, most private-sector employers offer employees the opportunity to participate in a health benefit plan: either (1) a self-funded or (2) a fully insured plan with most employers electing to offer self-funded health plans to their employees. Effectively, according to KFF, 67% of covered employees are participants of self-funded health plans.
In the simplest of terms, the difference between a self-funded and a fully insured plan can be described as:
- A Self-Funded health plan is structured by the employer and in essence, the employer is running their own health plan. The employer assumes all the risk, determines what is included in the plan and is financially liable to make determinations and pay the claims.
- A Fully insured health plan is the ‘traditional model’ whereby an employer offers a plan that is purchased from an insurance company and pays them a premium for each employee that participates in the plan. In turn, the insurance company collects premiums from the employer based on the number of enrollees and pays healthcare claims according to the coverage outlined in the policy purchased.
An important note:
- Self-funded claims are ultimately paid by the employer and fully insured claims are paid by insurance companies. However, most employers with self-funded plans hire a third-party administrator (TPA) to handle the processing of the medical claims including making coverage benefit determinations and deciding on payment allowances. Ironically, the TPA is typically one the major insurance companies such as Aetna, Cigna, UHC and BCBS – the same entities that are offering and administering fully insured health plans which can make it difficult to determine who is responsible for paying the claim.
Why Does the Type of Plan Matter?
While the type of plan determines “who is paying the claim”, it also dictates the specific law(s) that govern, under certain provisions, the administration, enforcement and claim dispute resolutions processes. The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that governs, in part, employee sponsored or self-insured health plans (excluding government and charitable organizations), providing protections for individuals in these plans that includes mandating employers to provide plan members with:
- written plan documents explaining the terms of the benefit plan; and
- a summary of the benefit plan or summary plan description (SPD) and requires distribution of the SPD by the plan administrator to the plan participants.
ERISA specifies that plans must establish a grievance and appeals process, and the Act also permits participants to sue for breaches of a health plan’s fiduciary duty. Fully insured plans are also subject to ERISA.
Under the No Surprises Act (NSA) that is scheduled to go into effect, January 2022, providers are prohibited from balance billing patients in certain circumstances1. The bill applies to virtually all types of health plans and includes provisions for handling payment disputes. Similarly, State-specific surprise billing laws that have a comprehensive methodology for resolving payment disputes, typically apply only to fully insured policies (unless a self-funded plan decides to “opt-in”). With this new legislation, State balance billing laws will take precedence over the federal Act for claims that qualify.
All interested parties (providers, insurers, facilities) will need to understand not only “who is paying the claim” but even more critical will be having the expertise to determine which law or laws apply, how to comply with any regulations, and how to effectively challenge and maximize claims reimbursements given the complexity and restraints.
Providers during the verification of benefits process, should capture the type of health plan a covered patient has in preparation for any adverse claim determination. Understanding “who is paying the claim” will be necessary in order to decipher the best approach to maximize out-of-network reimbursements and to comply with the applicable state or federal regulations.