External Review for ERISA Plans: When It Applies
After you exhaust an ERISA plan's internal appeals, external review gives you an independent, binding second opinion. For non-grandfathered self-funded plans this runs through the FEDERAL external-review process under 45 CFR 147.136, because state external review generally does not reach self-funded ERISA plans.
External review is an independent second opinion on a denial, run by an outside independent review organization (IRO) whose decision is binding on the plan. For most non-grandfathered employer plans you reach it after exhausting the internal appeal. The key ERISA wrinkle: state external-review programs generally cannot reach self-funded ERISA plans (ERISA preempts state insurance law), so non-grandfathered self-funded plans use the FEDERAL external-review process under 45 CFR 147.136(d) instead. External review applies mainly to denials involving medical judgment (medical necessity, appropriateness, level of care) and experimental/investigational determinations, and to rescissions, not to straightforward eligibility disputes. Standard federal external review is decided within 45 days; a truly urgent case is expedited to as fast as 72 hours. It is free to you. Grandfathered, church, government, Medicare, and Medicaid plans follow different rules, and your plan document and final denial control.
Internal appeals ask the plan to reconsider its own decision. External review does something different and, for many claimants, more powerful: it hands the file to an independent panel of medical reviewers with no stake in the outcome, and their answer binds the plan. The Affordable Care Act extended external review to most non-grandfathered health plans, but ERISA adds a twist that trips people up. Because ERISA preempts state insurance law, the state external-review programs that protect fully-insured policyholders generally do not reach self-funded ERISA plans. Those plans use a separate federal process instead. This guide explains when external review applies, the crucial self-funded vs fully-insured routing, what kinds of denials qualify, and the timelines, so you can take the right path after an internal appeal is upheld. It is general information, not legal advice.
What external review is
External review is a review of your denial by an independent review organization (IRO), a third party with no financial relationship to the plan, staffed by clinical reviewers. The ACA's framework, implemented at 45 CFR 147.136, requires non-grandfathered group and individual health plans to offer it, and the IRO's decision is binding: if the IRO overturns the denial, the plan must provide the benefit.
You generally reach external review after exhausting the plan's internal appeal, though in a genuinely urgent situation the two can run at the same time. There is no charge to you for federal external review.
The self-funded routing that matters most
Here is the point most guides miss. States run external-review programs for the insurance products they regulate, that is, fully-insured plans. But ERISA preempts state insurance law as applied to self-funded employer plans, so a state program generally cannot order a self-funded ERISA plan to do anything. Self-funded plans therefore do not use state external review.
Instead, non-grandfathered self-funded ERISA plans use the FEDERAL external-review process under 45 CFR 147.136(d). In practice, self-funded plans satisfy this either through the HHS-administered federal external-review process (with accredited IROs) or through a private accredited-IRO process that meets the federal standards. The upshot for you: if your plan is self-funded and your internal appeal is upheld, look to the federal process and the instructions in your final denial notice, not to your state insurance department's review program.
| Plan type | Which external review applies |
|---|---|
| Fully-insured (non-grandfathered) | State external-review program (or federal if the state process doesn't qualify) |
| Self-funded ERISA (non-grandfathered) | Federal external-review process under 45 CFR 147.136(d) |
| Grandfathered plan | Generally exempt from these external-review requirements |
| Government / church plan | Different rules; check the plan and applicable law |
| Medicare / Medicaid | Separate appeal systems entirely |
Which denials qualify
External review is aimed at clinical and coverage-judgment disputes, not every disagreement. Under the federal rules it applies to adverse determinations that involve medical judgment, such as medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit, and to determinations that a treatment is experimental or investigational, as well as to rescissions of coverage.
It generally does not cover disputes that turn purely on a contractual eligibility question (for example, whether you were enrolled on the date of service), which are resolved through the internal process or other channels. If you are unsure whether your denial qualifies, the final internal denial notice must explain your external-review rights and how to request them.
Timelines and how to request it
Under 45 CFR 147.136, standard external review generally produces a written decision from the IRO within 45 days of the request. For urgent situations, where the standard timeline could seriously jeopardize your health or ability to regain function, an expedited external review is available and is decided as fast as the medical circumstances require, in no event more than 72 hours.
To start it, follow the instructions in your final internal denial notice, which is required to describe your external-review rights. You typically have a defined window after the final internal denial to file (commonly up to four months), so do not sit on it. Once the IRO decides, the plan is bound, an overturned denial means the plan must cover the service.
| Track | IRO decision due |
|---|---|
| Standard federal external review | Within 45 days of the request |
| Expedited (urgent) external review | As fast as the situation requires, no more than 72 hours |
What the IRO looks at, and how to strengthen your file
The independent review organization decides on the record: the documents the plan had, the plan's coverage terms and clinical criteria, your submitted evidence, and applicable clinical standards. The reviewers are clinicians in a relevant specialty, so the file that persuades them is clinical, not emotional. That means the work you did during the internal appeal, obtaining the plan's criteria and rebutting them point by point, carries straight into external review.
To strengthen an external-review submission: include the treating physician's letter of medical necessity addressing each criterion; attach the relevant records that show your situation meets the clinical standard; cite professional-society guidelines or peer-reviewed evidence supporting the treatment; and, where the plan called something experimental or investigational, provide evidence that it is accepted or supported for your condition. Many external-review processes allow you to submit additional information within a short window after you request review, use it.
After external review: your remaining options
If the IRO overturns the denial, the plan must provide or pay for the benefit, that is the point of a binding review. If the IRO upholds the denial, your administrative options are largely finished, and for an ERISA plan the remaining path is generally a civil action under ERISA section 502(a)(1)(B) in federal court. That is a specialized, record-based proceeding, often decided on the administrative record and sometimes under a deferential standard, so it is the stage where consulting a qualified ERISA attorney matters most.
This is also why the earlier steps matter so much: by the time external review concludes, the record is essentially set. A complete, criterion-matched file built during the internal appeal and external review is both your best chance to win outright and the foundation for anything that follows. None of this is legal advice; it is general information to help you understand the sequence.
Where external review sits in the sequence
Think of external review as the third station on the line: internal appeal first, external review second, and, only if both uphold the denial, a possible ERISA lawsuit third. Because external review is independent and binding, it is often the best real chance to overturn a medical-necessity denial without going to court, and it is free. Build the strongest possible record during the internal appeal, because the IRO reviews the file, and preserve your right to external review by requesting it within the deadline in your final denial. As always, the plan document and the notices you receive control the specifics; this is general information, not legal advice.
Frequently asked questions
Can I use my state's external review for a self-funded employer plan?
Generally no. ERISA preempts state insurance law as applied to self-funded plans, so state external-review programs usually cannot reach them. Non-grandfathered self-funded ERISA plans use the federal external-review process under 45 CFR 147.136(d) instead. Check your final denial notice for the specific instructions.
Is the external reviewer's decision binding?
Yes. The independent review organization's decision is binding on the plan (and on you). If the IRO overturns the denial, the plan must provide or pay for the benefit.
What kinds of denials can go to external review?
Denials involving medical judgment, medical necessity, appropriateness, level or setting of care, effectiveness, experimental or investigational determinations, and rescissions of coverage. Pure eligibility or contractual disputes generally are not eligible.
How long does external review take?
Standard federal external review generally yields an IRO decision within 45 days of the request. Urgent cases qualify for expedited review, decided as fast as the medical situation requires and no more than 72 hours.
Does external review cost anything?
Federal external review is free to you. Some state programs charge a small filing fee (often waived for hardship), but for the self-funded ERISA plans that use the federal process there is no charge.
Do I have to finish the internal appeal first?
Usually yes, you generally must exhaust the plan's internal appeal before external review. In a genuinely urgent situation, the internal appeal and an expedited external review can proceed at the same time.
What if my plan is grandfathered or a government plan?
Grandfathered plans are generally exempt from these ACA external-review requirements, and government and church plans follow different rules. Medicare and Medicaid have their own separate appeal systems. Confirm your plan type before relying on the federal external-review process.
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