September 4, 2026
12:49 am

Why Kentucky AOB Law Doesn't Reach Every Dental Patient: The ERISA Self-Funded Plan Exception

Kentucky’s Assignment of Benefits law, KRS 304.17C-137, took effect January 1, 2026, requiring payers to honor written benefit assignments for out-of-network dental care. However, the law only applies to fully insured plans. Self-funded ERISA plans are exempt due to federal preemption, meaning nearly 46% of group dental plans can still mail checks directly to patients instead of practices. This creates cash flow delays, administrative burden, and awkward patient collection conversations. To protect revenue, billing teams must verify each patient’s plan funding type before treatment, collect payment upfront for known ERISA plans, strengthen financial policy language, educate patients about plan structures, and consider outsourcing to Kentucky dental billing specialists who can identify ERISA policies proactively and manage the revenue cycle more effectively.

Kentucky’s new Assignment of Benefits law is finally live, and you figure those pesky insurance checks will stop showing up in your patients’ mailboxes.

Then a check lands in a patient’s mailbox anyway.

Kentucky’s House Bill 210, now written into law as KRS 304.17C-137, took effect on January 1, 2026, and it was supposed to fix this exact issue by requiring payers to accept dental benefit assignments made by covered persons in writing on a form established by the state’s insurance commissioner.

But there’s a catch, and it’s a big one. A federal law called ERISA carves out nearly half of your patient base from this protection entirely.

Let’s break down why that happens and, more importantly, how the right support through dedicated dental billing services in Kentucky helps your practice.

Kentucky AOB Law: What It Actually Promises

Kentucky’s Department of Insurance rolled out HB 210 to solve a real problem. Out-of-network dentists were doing the work, but insurers kept mailing reimbursement checks straight to patients instead of the practice, leading to cash flow issues.

The new law lets Kentuckians with non-ERISA, private insurance plans choose the dentist they want, whether that dentist is in-network or out.

The patient signs a standardized assignment form issued by the Kentucky DOI.
Once both the patient and the dental practice agree, the practice can bill the insurer directly, and the payment goes straight to the assigned facility.
The patient can cancel that agreement in writing whenever they want.

Sounds like a clean fix, right? It is, but only for plans the state actually has authority over.

Why Are Patients Still Receiving the Checks?

ERISA self-funded plans are exempt.

The Kentucky Dental Association confirmed this directly, noting the new law applies to Kentuckians with non-ERISA, private insurance plans. If a patient’s coverage falls under a self-funded ERISA plan, the state’s mandate simply doesn’t apply. The carrier can, and often will, cut the check to the patient instead of your practice.

Why does federal law get to override a state statute like this? That’s where preemption comes in, and it’s worth understanding if you want to protect your revenue cycle.

Fully Insured vs. Self-Funded: What's the Difference?

Not all dental plans work the same way. An insurance company backs some. Others are backed by the employer’s own bank account. That difference determines whether Kentucky’s new law even applies.

Feature	Fully Insured Plans	Self-Funded (ERISA) Plans
Who pays claims	The insurance carrier, using collected premiums	The employer, using its own money
Carrier's role	Risk-bearing insurer	Third-party administrator (TPA) only
Who regulates it	State insurance department	Federal Department of Labor
Does Kentucky HB 210 apply?	Yes, the carrier must pay the dentist directly	No, carrier can still pay the patient

In a self-funded arrangement, carriers administering these plans use their interpretation of ERISA to preempt compliance with state laws. The insurance company isn’t taking on financial risk. It’s just processing paperwork for the employer, and that shifts the whole plan under federal jurisdiction instead of state law.

ERISA Preemption: The Legal Loophole

ERISA preemption is a legal doctrine stating that the federal employee benefits law overrides conflicting state insurance regulations. When a dental plan is self-funded and governed by ERISA, state assignment-of-benefits mandates, no matter how well-intentioned, don’t apply to it.

This shift toward self-funded plans has caused carriers to increasingly lean on ERISA to sidestep the more than 360 dental insurance reform laws states have enacted to protect patients and providers. Kentucky’s HB 210 just joined that long list of state protections that ERISA can technically override.

How Many of Your Patients Does This Actually Affect?

Nearly half of dental plans are self-funded. According to the National Association of Dental Plans (NADP) 2025 Dental Benefits Report, 46% of group dental benefits are self-insured, a share that’s actually climbed after years of decline. That means for every ten out-of-network patients walking through your door, roughly four or five could have coverage the new state law simply doesn’t touch.

For a practice relying on Kentucky’s new protections to smooth out its collections process, that’s a huge gap to plan around.

The Real Cost to Your Revenue Cycle

So what happens when a check goes to the patient instead of your practice? Nothing good, honestly. A few things tend to unfold:

Cash flow gets stuck: Your practice is left waiting on a patient to notice they got a check, remember why, and actually forward it.
Your team’s time gets eaten up: Someone has to chase down missing EOBs and reconcile accounts that should’ve been simple.
Patient relationships get complicated: Nobody enjoys calling a patient to ask for money they’ve already deposited, and maybe already spent.

None of this is fun. But it’s fixable if your front desk knows what to look for before the appointment even happens.

What Should Your Dental Billing Team Do About It?

You can’t change federal law. All you can do is get ahead of it. Here’s how smart practices are adjusting their process right now.

Ask the Right Verification Question

Don’t just confirm the plan is active. Ask the payer’s representative if the plan is fully insured or self-funded. Most portals will tell you if you know to look.

Collect Payment Upfront for Known ERISA Plans

If verification flags a self-funded plan, shift gears. Collect the patient’s estimated portion at the time of service. You can still file the claim as a courtesy, but don’t wait on it for your revenue.

Tighten Your Financial Policy Forms

The patient owes the full balance regardless of where the insurance check lands. Add language requiring them to forward any misdirected payment within a set window, for example, 48 hours.

Educate Patients Before Treatment

Most patients have no clue their employer’s plan structure affects where the check goes. A two-minute conversation during treatment planning saves a world of trouble for collections later.

Outsource Your Billing Process

It’s important to make sure that an expert manages all the aspects of your dental RCM. Partner with a dental billing company, like TransDontics, that helps verify ERISA self-funded policies for each patient proactively, so you can make smart financial decisions on time, communicate with patients, and protect your revenue.

Protect Your Revenue From ERISA Plan Bottlenecks with Professional Billing Solutions

Conclusion

Kentucky’s HB 210 is a genuine step forward for out-of-network dental practices, no argument there. But it’s not a cure-all. With many group dental plans self-insured, your billing team can’t afford to treat every out-of-network patient the same way. Verify the plan’s funding type up front, tighten your financial policies, and set expectations with patients before treatment starts. That’s how you protect your cash flow, no matter which side of the ERISA line a patient falls on.

Frequently Ask Questions (FAQs)

Does Kentucky's new AOB law apply to all dental insurance plans?

It applies only to state-regulated, fully insured plans. Self-funded plans governed by ERISA are exempt because federal law preempts the state mandate.

How can my office tell if a patient's plan is self-funded?

Ask the insurance representative directly during verification, or check the payer portal for funding type. Don’t assume based on the carrier’s name alone, since major carriers administer both fully insured and self-funded plans.

What is ERISA preemption in simple terms?

It’s the legal principle that federal benefits law overrides state insurance rules when a conflict exists. It’s why a self-funded plan’s TPA can legally bypass Kentucky’s dental assignment law.

Can my practice still get paid directly for an ERISA self-funded patient?

Sometimes, if the employer’s plan documents allow it. But you can’t count on it. The safest approach is collecting payment upfront and letting the patient handle their own reimbursement.

What should go into a financial policy for out-of-network patients?

Include clear language on total patient responsibility, a deadline for forwarding any misdirected insurance checks, and a signed acknowledgment that self-funded plans may bypass state assignment protections.

Asad Aleem

Dental Billing Specialist & RCM Expert

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