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rules, which govern reporting, disclosure, fiduciary responsibility, and enforcement rights, even though ERISA was not originally enacted as a healthcare statute.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:

1. 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. 
2. 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.
3. 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.
4. 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.
5. 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.