Self-Funded Employer Plans (ERISA): How Appeals Work

Written by Aptiva Health Editorial Team · Reviewed by Taylor Sorrels, Esq. and Crystal Brake, RCM Director · Editorial & review standards · How we research

If you get health coverage through work, your plan may be self-funded. That means your employer pays the claims with its own money instead of buying a policy from an insurance company. Many large employers do this.

Self-funded plans follow a federal law called ERISA and federal claims rules, not Kentucky or Indiana insurance rules. Those federal rules still give you strong appeal rights.

This guide explains how appeals work for self-funded employer plans. It is part of the Coverage & Appeals Center.

What “self-funded” means

There are two main kinds of job-based health plans:

• Fully insured. Your employer buys a policy from an insurance company. The insurer pays claims, and state insurance law applies. See fully insured and Marketplace plans.
• Self-funded (self-insured). Your employer pays claims itself. It often hires an insurance company just to run the plan and process claims. Federal rules apply.

Your card may show a well-known insurer’s name even when your employer is the one paying. That insurer may only be the plan’s administrator.

How to tell if your plan is self-funded

1. Check your summary plan description. This booklet, often called the SPD, must name any insurance company involved. It must also say whether benefits are guaranteed by an insurance policy, or whether the insurer only provides services like paying claims (29 CFR 2520.102-3).
2. Ask your HR or benefits office. Ask in writing: “Is our health plan fully insured or self-funded?”
3. Call the number on your card. Ask the same question and note a reference number.
4. Read your denial letter. It must explain the appeal steps and your rights under federal law (29 CFR 2560.503-1(g)(1)).

Not every work plan follows ERISA. Plans for state and local government workers, such as the Kentucky Employee Health Plan, follow different rules. State employees in Kentucky can call the Department of Employee Insurance at 888-581-8834 (KY DOI Division of Consumer Protection).

Self-funded plan appeals at a glance

Your plan may give you more time than these minimums. Use the deadline in your denial letter, and file early.

The 2026 federal prior authorization deadlines (72 hours urgent, 7 calendar days standard) apply to Medicare Advantage and Medicaid, not to employer plans (CMS-0057-F).

What your denial letter must tell you

Under federal rules, a denial notice from an employer plan must include (29 CFR 2560.503-1(g)(1)):

• The specific reason for the denial.
• The plan rules the decision is based on.
• What extra information would help, and why.
• The appeal steps and time limits, including your right to bring a lawsuit under ERISA after the appeal.
• Any internal rule or guideline the plan used, or a statement that you can get it free.
• For urgent care, how the expedited review works.

If something is missing, ask the plan for it in writing.

Step 1: The internal appeal

An internal appeal asks the plan to look at its decision again. You have important rights during this step (29 CFR 2560.503-1(h)(2)):

• You can send written comments, records and other documents.
• You can get free copies of all documents relevant to your claim.
• The plan must consider everything you send, even if it was not part of the first decision.
• If the plan relies on new evidence or a new reason, it must give it to you free, in time for you to respond (45 CFR 147.136(b)(2)(ii)).

1. Mark your deadline. Find the appeal deadline in your denial letter. It must be at least 180 days, but don’t wait.
2. Ask for your claim file. Request the plan’s criteria, the reviewer notes and the plan rules it used. These are free.
3. Ask your clinician for a letter. It should answer the exact denial reason, point by point.
4. Gather your records. Include visit notes, test results and treatments you already tried.
5. Write and send your appeal. Use the address or fax in the denial letter. Keep proof you sent it.
6. Ask for an urgent review if needed. If waiting could seriously harm your health, say so. The plan must decide an urgent appeal within 72 hours.
7. Watch for a second level. Some employer plans have two levels of internal appeal. Your letter will say if there is another step.

For help with what to say, see denied as “not medically necessary” and denied for missing prior authorization. The appeal letter builder can help you write your letter.

Step 2: Federal external review

If the plan upholds its denial, you can often ask for external review. An independent review organization (IRO) that does not work for the plan looks at your case.

Self-funded employer plans generally use the federal external review process, not the state’s (29 CFR 2590.715-2719(c); DOL Technical Release 2011-02). A private self-funded plan usually meets this rule by contracting with at least three independent review organizations. Some plans may choose to use a state program if the state allows it. Your final denial letter will tell you which process your plan uses and where to send your request.

What can be reviewed

Federal external review covers denials that involve medical judgment (45 CFR 147.136(d)). For example:

• The care is “not medically necessary” or not appropriate.
• The setting or level of care is wrong.
• The care is “experimental or investigational.”
• Your coverage was canceled back to its start date (a rescission).
• Some surprise-billing disputes under the No Surprises Act.

Denials based on eligibility, such as whether you were enrolled in the plan, cannot go to federal external review.

How the federal timeline works

• Request: within 4 months after you get the final internal denial.
• Plan’s first check: the plan reviews your request within 5 business days. It tells you in writing within 1 more business day if your request is eligible.
• More information: you can send more information to the reviewer within 10 business days after you get the reviewer’s notice.
• Decision: within 45 days after the reviewer gets your request, or within 72 hours if expedited.

If the reviewer reverses the denial, the plan “immediately must provide coverage or payment” (45 CFR 147.136(d)). The decision is binding on both you and the plan (CMS: HHS-Administered Federal External Review).

Use the appeal deadline calculator to track your 4-month window.

[Your name]
[Your address] · [Your phone] · [Your email]

[Date]

[Plan name] — Appeals / External Review
[Address or fax from your final denial letter]

RE: Request for external review
Member name: [Name] · Member ID: [Number]
Employer / group number: [Group number]
Claim or reference number: [Number]
Service denied: [Service]
Date of final internal denial: [Date]

To whom it may concern:

I request an external review by an independent review organization of your final decision to deny [service]. Your letter dated [date] says: "[exact reason]."

I believe this decision involves medical judgment. The care is medically necessary for me, as my clinician explains.

Enclosed are:
- Letter of medical necessity from [clinician]
- Medical records from [dates]
- Your final internal appeal decision and original denial letter
- The plan rules or criteria you used, with the parts I meet marked

[If urgent:] My clinician believes waiting could seriously harm my health. I request an expedited external review.

Please confirm in writing that you received this request and tell me which independent review organization is assigned.

Sincerely,
[Signature]
[Printed name]

If the plan doesn’t follow the rules

If a plan fails to set up or follow claims procedures that meet the federal rule, you are treated as having finished the plan’s appeal process (29 CFR 2560.503-1(l)). Your denial letter must also explain your right to sue under ERISA.

What Kentucky and Indiana agencies can do

State insurance departments generally cannot step in on self-funded plans:

• Kentucky. The Department of Insurance says its appeal and external review rights apply to fully insured plans issued in Kentucky, not to employer self-funded plans (KY DOI: Appealing a Denial (Expanded)). It says it does not have authority to investigate complaints about these plans (KY DOI Health Insurance Fact Sheet).
• Indiana. The Department of Insurance says employer self-funded plans fall outside its jurisdiction. The U.S. Department of Labor regulates them (IDOI: Jurisdiction).

If your plan is fully insured instead, see the Kentucky and Indiana guides.

Common mistakes

• Assuming the insurer on your card is the payer. It may only be the administrator. Ask whether the plan is self-funded.
• Sending an external review request to the state. Follow your plan’s instructions in the final denial letter.
• Missing a second internal level. Some employer plans have two levels. Finish each one on time.

Where to get help

The Indiana Department of Insurance refers self-funded plan complaints to two Department of Labor regional offices: Chicago, (312) 353-0900, for northern Indiana, and Cincinnati, (859) 578-4680, for southern Indiana (IDOI: Resolving Health Care Insurance Disputes).

Not sure which route your plan uses? Try the appeal route wizard. To understand the codes on your denial, use the denial decoder.