In A Comparison of Self-Funded and Insured Health and Welfare Plans, health benefits expert witness Mark Johnson, J.D., Ph.D., ERISA Benefits Consulting, Inc., writes:
Employers usually hire an administrator to process the claims. Self-funded plans are generally not subject to state laws and regulations, which means that state-mandated benefits, state prompt payment rules, or standards of network adequacy do not apply. Normally employers contract insurance companies or third party administrators (TPAs) to keep track of contributions, process claims, manage enrollment and other administrative functions. This can be confusing because a self funded plan may look like insurance but it is not; and the claims processor is functioning as a TPA, not as an insurance company. Therefore, it and the plan are not subject to state regulation.