ERISA

ERISA is the Employee Retirement Income Security Act of 1974 — the federal law that governs private-sector employee benefit plans, including health plans. It sets minimum standards for plan documentation, disclosure to participants, fiduciary responsibility, and claims and appeals procedures. Most importantly for health benefits, ERISA preempts state insurance laws for self-funded plans, which is what makes self-funding so attractive as a plan design.

The preemption is the whole game. A fully-insured plan in Texas must comply with Texas insurance regulations — mandated benefits, network adequacy rules, claim timelines, state premium taxes. A self-funded ERISA plan in Texas is largely exempt from those rules and instead follows federal ERISA rules and whatever the employer decides to include in the plan document. This gives self-funded employers enormous design flexibility — custom formularies, direct provider contracts, reference-based pricing, benefit-tier steering — that fully-insured employers can't access. ERISA also creates specific fiduciary duties for plan sponsors: the employer must run the plan in the exclusive interest of participants, which is now generating litigation over how self-funded employers select and monitor their TPAs and PBMs.

The takeaway: if you're a self-funded employer, you're an ERISA fiduciary. Document your plan decisions, benchmark your vendors, and pay attention to the recent wave of ERISA lawsuits over PBM contracts and health plan fees. The bar for plan sponsor diligence is rising.