> ## Documentation Index
> Fetch the complete documentation index at: https://mso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Payers vs insurance companies (they're not synonyms)

> A payer is anyone who pays claims. Insurance companies bear risk on fully-insured plans, but most large-employer coverage is self-funded, where the carrier is only an administrator.

A **payer** is any entity that pays healthcare claims. An **insurance company** is a payer that bears underwriting risk. Those are different categories, and the difference determines who actually owes you money, which laws govern your appeals, and whether state insurance protections apply at all.

## The distinction that matters

When a patient hands you an Aetna card, Aetna may be:

* **The insurer**, Aetna underwrote the plan, collected premiums, and bears the risk of claims exceeding them. This is a **fully-insured** plan.
* **Only the administrator**, the patient's employer bears the risk and pays the claims from its own funds. Aetna processes claims, applies the network, and issues the card, but the money is the employer's. This is a **self-funded** (self-insured) plan, and Aetna is acting as a **third-party administrator (TPA)** or under an **administrative services only (ASO)** contract.

**The card looks identical.** The network is the same. The claims process is the same. What differs is who bears the risk, and the law that governs the plan.

Self-funding is not a niche arrangement. It is the dominant model for large employers, which means a large share of your commercial volume may be self-funded even though every card carries a carrier's name.

## Why it matters practically

### ERISA preemption

Self-funded employer plans are governed by the **Employee Retirement Income Security Act (ERISA)**, 29 U.S.C. § 1001 et seq., which broadly preempts state laws that "relate to" employee benefit plans. State insurance regulation is saved from preemption, but self-funded plans are expressly not deemed insurers, which puts them outside that saving clause.<sup>1</sup>

Consequences for a practice:

|                               | Fully-insured plan            | Self-funded plan                                 |
| ----------------------------- | ----------------------------- | ------------------------------------------------ |
| **Governing law**             | State insurance law + ERISA   | ERISA; state insurance law largely preempted     |
| **State prompt-pay statutes** | ✅ Generally apply             | ❌ Generally preempted                            |
| **State external review**     | ✅ Generally available         | ❌ Generally not; ERISA claims procedures instead |
| **State mandated benefits**   | ✅ Apply                       | ❌ Generally do not                               |
| **Appeal procedure**          | State rules plus plan terms   | ERISA claims regulation, 29 C.F.R. § 2560.503-1  |
| **Complain to**               | State department of insurance | US Department of Labor                           |
| **Who ultimately pays**       | The insurer                   | The employer's assets                            |

So: your state's prompt-pay law requiring clean claims to be paid within 30 days may simply not apply to a large fraction of your commercial claims. Filing a complaint with your state insurance department about a self-funded plan generally goes nowhere.

<Tip>
  **Determine funding status before you escalate.** The 271 eligibility response sometimes indicates it. The member's summary plan description states it. The plan's Form 5500 filing is public. Asking the payer's provider services line usually works. Doing this first saves you citing a statute that doesn't apply, which weakens an otherwise good appeal.
</Tip>

## The full taxonomy of payers

| Payer type                            | Who bears risk                      | Notes                                        |
| ------------------------------------- | ----------------------------------- | -------------------------------------------- |
| **Commercial insurer, fully-insured** | The insurer                         | State-regulated                              |
| **Self-funded employer plan**         | The employer                        | ERISA-governed; a TPA administers            |
| **TPA / ASO administrator**           | Nobody, it is a service             | The name on the card                         |
| **Medicare Part A/B (FFS)**           | Federal government                  | Administered by MACs                         |
| **Medicare Advantage (Part C)**       | The MA plan                         | Private plan paid capitated rates by CMS     |
| **Medicaid FFS**                      | Federal and state                   | State-administered                           |
| **Medicaid managed care**             | The MCO                             | Centene, Molina, regional plans              |
| **CHIP**                              | Federal and state                   | Often via the same MCOs                      |
| **TRICARE**                           | Federal government                  | Regional contractors                         |
| **VA Community Care**                 | Federal government                  | Optum and TriWest by region; referral-driven |
| **Workers' compensation**             | WC carrier or self-insured employer | State fee schedules; not health insurance    |
| **Auto / PIP**                        | Auto insurer                        | PIP states; attorney liens common            |
| **IPAs and risk-bearing groups**      | The group, under capitation or risk | Delegated arrangements                       |
| **Rental / silent PPO networks**      | Nobody, network access only         | MultiPlan and similar                        |
| **The patient**                       | The patient                         | In many practices now a top-three "payer"    |

## Networks are a fourth thing

Payer, plan, and **network** get conflated constantly:

* **Payer**, who pays
* **Plan**, the benefit design the member bought
* **Network**, the set of providers with contracted rates

One payer offers many plans. One plan uses one or more networks. And **rental networks** let a payer you have no direct contract with access your contracted rate through a third-party network you joined years ago.

**Silent PPOs** are how a practice discovers a discount taken by a payer it never contracted with. The mechanism is usually a network access or assignment clause in a contract you signed. Read those provisions in every payer contract. See [Underpayments, fee schedules, and payer contracts](/concepts/payments/underpayments-and-contracts).

## Practical implications

**Your appeal strategy depends on plan type.** Fully-insured gets a state-law argument and external review. Self-funded gets an ERISA claims-procedure argument.

**Prompt-pay leverage is uneven.** Know which claims your state statute actually covers.

**"Payer mix" should mean funding type, not just brand.** A practice that is 60% "Aetna" may be substantially self-funded, with different collection dynamics.

**Non-health payers behave differently.** Workers' compensation runs on state fee schedules with e-billing mandates. Auto PIP involves attorney liens and litigation timelines. Neither behaves like a health plan.

## Sources

1. ERISA, 29 U.S.C. § 1001 et seq. Preemption at § 1144(a); the insurance savings clause at § 1144(b)(2)(A); the "deemer" clause at § 1144(b)(2)(B), which prevents self-funded plans from being deemed insurers for purposes of state insurance regulation. Claims procedure regulation: [29 C.F.R. § 2560.503-1](https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-L/part-2560/section-2560.503-1). US Department of Labor, [Health Plans and Benefits](https://www.dol.gov/general/topic/health-plans).


## Related topics

- [The US payer landscape](/concepts/payments/the-payer-landscape.md)
- [Underpayments, fee schedules, and payer contracts](/concepts/payments/underpayments-and-contracts.md)
- [Claim denials, explained](/concepts/payments/claim-denials.md)
- [File appeals](/guides/billing/file-appeals.md)
- [Enroll and contract with commercial payers](/guides/enrollment/enroll-with-commercial-payers.md)
- [How to use the payer reference](/reference/payers/overview.md)
- [Glossary](/reference/appendix/glossary.md)