Revenue Recovery Series Part 3: What Is ERISA and How Does It Affect Healthcare Providers?

By: Pearl Walia

What is ERISA in Simple Terms?

ERISA, the Employee Retirement Income Security Act of 1974, is a federal law that establishes standards for most employer-sponsored retirement and health benefit plans in order to protect employees’ retirement assets. Before ERISA, employers often mishandled funds and failed to deliver promised benefits, leaving workers vulnerable to arbitrary coverage denials. In response, Congress enacted ERISA to protect employees by setting minimum requirements for how benefit plans must be administered, outlining the responsibilities of plan guidelines of plan fiduciaries, and establishing legal remedies when benefits are improperly denied or mishandled. Because ERISA is a federal law, it generally preempts, or overrides, conflicting state laws related to employer-sponsored benefit plans, creating a standardized set of rules that employers, insurers, and third-party administrators must follow.

ERISA’s scope extends beyond employer-sponsored pension and retirement plans to private-sector plans as well, including those that provide medical, surgical, hospital, prescription drug, and disability benefits. When an employer sponsors a health plan, that plan is often subject to ERISA’s federal rules, which govern reporting, disclosure, fiduciary responsibility, and enforcement rights, even though ERISA was not originally enacted as a healthcare statute.

Why Does ERISA Matter to Providers?

According to the U.S. Census Bureau, employer-sponsored health insurance covers 53.8% of the U.S. population. Because ERISA governs so much of the employer-sponsored plan landscape, it remains a critical framework for providers to understand, as they bill for a growing share of patients under this plan type.

ERISA has a significant impact on provider reimbursement for patients with employer-sponsored benefit plans. Many patients receive coverage through employer-sponsored plans governed by ERISA, which means that providers must follow the plan’s specific procedures for claims, appeals, and reimbursement when seeking payment. When billing for a patient covered under an ERISA employer-sponsored plan, providers should be familiar with ERISA’s provisions and how they differ from traditional state-level rules. Only a small percentage of providers fully understand how ERISA works, but with the right guidance, providers can learn their rights and how ERISA may help or limit them in reimbursement. Some key differences between ERISA and conventional state-level payer laws include:

Filing Time Requirements: State and local laws often impose a fixed deadline for submitting medical claims, such as 90 or 180 days, which may be outlined in the provider’s contract. Under ERISA, however, there is no specific statutory time limit for timely filing. Instead, the employer’s health plan is permitted to set its own filing deadlines.
Timeframe for Appeals: Payers traditionally may require appeals within 30 or 60 days under contract. However, ERISA imposes an 180-day appeal deadline for denied claims.
Retroactive Reviews and Recoupments: Some provider contracts allow payers to recoup overpayments from future claims. In other words, if a payer accidentally overpays a provider, it can deduct that amount from future payments owed. Under an ERISA-governed health plan, however, this kind of retroactive recoupment is prohibited.
Discretionary Decisions of Fiduciaries: A fiduciary is anyone with discretionary authority over how a plan is implemented and how funds are dispensed. Fiduciaries have the discretion to hire and monitor service providers, including health care providers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs). This matters to providers because it reflects ERISA’s additional disclosure and reporting requirements, as well as the fiduciary’s role in plan administration.
Access to Medical Criteria: Under ERISA, payers must provide, upon request and free of charge, the regulations or criteria used to deny a claim, along with any scientific or clinical judgement that supported the denial.

How Can Providers Use Federal Law to Bypass State-Level Payer Stalling Tactics?

It is essential for providers to understand the complexities of ERISA, and how it can affect reimbursement, particularly during payer disputes, denials, or delays. Unlike other federal health and insurance laws, which often set a foundational framework that states can build upon, ERISA broadly overrides conflicting state rules that attempt to regulate employer health plans. While payers commonly rely on strict approval tactics during claim reviews, providers may be able to counter these tactics using ERISA’s federal provisions instead. Providers are advised to first confirm that a patient’s health plan is governed by ERISA, then review its specific provisions to understand how timelines and procedures may impact reimbursement. Providers should also keep a copy of each patient’s insurance policy on file and review it for any limitations that may apply.

Leveraging ERISA as a Tool for Success

More than half of the American population receives health insurance through their employer, and many of these plans are governed by ERISA. While most billing teams focus primarily on state insurance laws, contract provisions, and routine appeals, ERISA creates a separate set of federal rights for employer-sponsored plans. Because it governs how fiduciaries must select and monitor providers, and prohibits health plans from paying more than reasonable compensation, providers are encouraged to become well-versed in these provisions and how they affect the health plan. ERISA remains a powerful tool in payer disputes, establishing strict, federally managed regulations that health plans must follow when handling claims. Many providers are unaware of the unique rights ERISA provides, leaving valuable recovery strategies for improperly denied claims and appeals largely untapped. Our firm can help providers navigate ERISA’s provisions and understand how they apply to their practice amid the growing number of employer-sponsored health plans. We can help transform ERISA from a framework that may seem intimidating into a simple, valuable tool for providers.

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It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice; it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please get in touch with me using the contact information listed above.

All information and references to laws, rules, regulations, and advisory opinions were accurate as of this time, but laws are constantly evolving. Please get in touch with me to ensure that the law governing your business is up to date. Thank you.

29 July

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Understanding Provider–Payer Disputes: Key Issues in Reimbursement, Denials, and the NSA IDR Process

Posted by Jamaal R. Jones, Esq.

in Blog

By: Pearl Walia

Changes in politics, public policy, and economic conditions continue to influence contract negotiations between healthcare payers and providers. Shifts in reimbursement legislation, regulatory requirements, Medicaid eligibility rules, and compliance obligations all affect how parties evaluate contractual provisions. As a result, payer disputes remain a persistent and significant challenge across the healthcare industry.

Payers include health insurance companies and other entities that finance or administer healthcare benefits. Because providers and payers frequently disagree on issues such as medical necessity, coverage limitations, prior authorization requirements, and coding accuracy, reimbursement disputes have become a recurring revenue cycle management concern for hospitals, physician groups, and other healthcare professionals.

Network agreements between providers and insurers or third party administrators (TPAs) define the terms governing reimbursement, coding, billing, and covered services. Like many contractual disputes, payer conflicts often arise when a payer denies payment, delays payment, seeks recoupment of alleged overpayments, or reimburses a claim at an amount inconsistent with the contract or applicable law.

Common Reasons Healthcare Claims are Denied

Payers cite several common reasons to deny healthcare claim reimbursement, including:

Request for Medical Documentation: Payers frequently request treatment records and other supporting documentation to verify that the requirements for billing a covered service under the applicable CPT/HCPCS code(s) have been satisfied. Denials may follow if the payer determines that the submitted documentation is incomplete, insufficient, or does not substantiate the billed service.
Services Not Covered: Payers often deny claims on the basis that the billed service is not covered under the member’s benefit plan or under Medicare (for Medicare Advantage plans). Providers should consult legal counsel to review the governing contract, applicable statutes, regulations, and administrative guidance to determine whether the service is, in fact, excluded from coverage.
No Prior Authorization: Payers frequently deny claims for lack of prior authorization. Providers may rebut these denials by demonstrating that prior authorization was not required under the circumstances, could not reasonably be obtained in a timely manner, or was unnecessary because the provider can substantiate the medical necessity of the service For example, a provider administers life-saving treatment and requests authorization retroactively.
Missing Primary Care Provider (PCP) referral: Some payers require a PCP authorized referral before the member can receive specialized or out-of-network care. This denial reason largely parallels no prior authorization denials. A payer dispute can arise if there is no PCP on the insurance portal or the provider challenges the basis for the PCP referral requirement application to the circumstances.
Billed Claims Were Not Medical Necessity: Payers may deny a provider’s claims on the grounds that the underlying services were not medically necessary and therefore not covered. These disputes typically turn on differing legal, regulatory, or contractual definitions of medical necessity. Many payers incorporate cost‑oriented considerations into their medical‑necessity standards, including coverage rules, policy guidelines, utilization controls, and benefit limitations. Providers, by contrast, generally define medical necessity through individualized, reasonable clinical judgment—focusing on what the patient requires to diagnose, treat, or manage a condition.
Downcoding: Instead of denying the claim outright, payers may “downcode” a service—reducing the billed CPT/HCPCS code to a lower-level code that reimburses less. This typically occurs when the payer asserts that the documentation does not support the complexity, intensity, or time associated with the higher‑level code. Providers often challenge downcoding by demonstrating that the documentation meets all required elements for the original code, that the payer misapplied coding guidelines, or that the payer’s automated systems improperly downgraded the claim.

The No Surprises Act and the IDR Process

The No Surprises Act (“NSA”), effective January 1, 2022, is a federal law designed to protect patients from unexpected healthcare bills resulting from out-of-network care. Traditionally, a patient could be “balance billed” for the difference between a provider’s charges and the amount that their insurer chose to cover. The NSA sharply restricts this practice for certain categories of care.

Out-of-network providers include healthcare professionals, hospitals, and facilities that do not have a contractual relationship with a patient’s health plan. Under the NSA, these providers are generally prohibited from balance billing patients for emergency services, post-stabilization services, and certain non-emergency services provided at in-network facilities.

When a payer and provider disagree about the appropriate payment amount for a protected out‑of‑network claim, the NSA sets forth a structured dispute resolution process:

30-Day Open Negotiation Period: The parties must first attempt to resolve the dispute informally. If negotiations fail, either party may initiate the Independent Dispute Resolution (“IDR”) process.
IDR Process: After initiation, the parties enter a brief administrative phase in which they submit their payment offers and supporting documentation to a certified IDR entity. The arbitrator must then select one of the two offers—known as “baseball-style arbitration”—within the statutory timeframe, typically 30 days. In making this determination, the arbitrator considers several required factors, including:
1. the Qualifying Payment Amount (“QPA”),
2. the provider’s training and experience,
3. the complexity of the service,
4. patient acuity,
5. facility characteristics, and
6. any credible evidence of the payer’s or provider’s prior contracted rates.

The NSA’s core purpose is to ensure that patients are not financially penalized simply because their care—particularly in emergencies or facility‑based settings—involved an out‑of‑network provider they did not choose and could not avoid.

Because the NSA’s Independent Dispute Resolution process is highly technical, procedurally rigid, and continually evolving through federal rulemaking and litigation, many providers benefit from consulting a healthcare attorney before entering IDR.

Factors That Shape Claim Denial Appeal Strategy

Appealing a payer’s denial or underpayment is rarely a one‑size‑fits‑all process. The strategy our firm develops for each client depends on several key factors, including:

Type of Claim: The nature of the dispute—whether an underpayment, denial of coverage, medical‑necessity determination, or timely‑filing issue—directly shapes the appeal pathway and the legal arguments available.
Type of Insurance Plan: Different plan types are governed by different laws, regulations, and appeal procedures. These may include Medicaid managed care plans, ERISA self-funded employer plans, commercial fully insured plans, state employee health plans, and Federal Employee Health Benefits (“FEHB”) plans. Each framework imposes unique deadlines, documentation requirements, and remedies.
Place of Service: Reimbursement methodologies often vary depending on where the service was rendered—such as a hospital, ambulatory surgical center, physician’s office, or via telemedicine. These distinctions can influence both the applicable payment rules and the strength of the provider’s appeal.
Type of Service: The clinical nature of the service affects both the complexity of the dispute and the financial stakes involved. Emergency and out‑of‑network services may implicate the NSA, while similar services billed under a commercial plan may be governed by contractual appeal procedures. Surgical, specialty, and high‑acuity services often require more detailed clinical and regulatory arguments.
Type of Provider: Hospitals, physician groups, specialty practices, and out‑of‑network providers each face different payment structures, leverage points, and regulatory obligations. For example, in‑network providers are bound by managed‑care contract terms, while out‑of‑network providers may rely on the No Surprises Act or state law to challenge improper payment reductions.
Contractual versus Out-of-Network Claims: Whether the provider has a contract with the payer determines the governing rules and available remedies. Contracted claims are governed by negotiated rates and contractual dispute‑resolution procedures. Non‑contracted claims may instead rely on “usual, customary, and reasonable” (“UCR”) or usual and customary (“UC”) provider charges, statutory and regulatory coverage rules, or federal balance‑billing prohibitions.
Payer’s Action on the Claim: The appeal strategy also depends on the specific action taken by the payer—whether an initial denial, a partial payment, a downcoded claim, or a delayed payment. In some cases, providers may have additional rights under state prompt pay laws when an insurer fails to issue payment within required timeframes.

Because every provider–payer relationship is shaped by a unique combination of contractual terms, regulatory frameworks, and factual circumstances, there is rarely a single approach that resolves all disputes. The appeals process can be time‑consuming, administratively burdensome, and financially consequential.

Our firm works closely with providers to identify the most effective strategy for pursuing payment—whether through internal appeals, regulatory escalation, or litigation. By understanding the specific facts of each claim and the laws that govern the dispute, providers can better protect their reimbursement rights and remain focused on delivering patient care.

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