Self-Funded Health Insurance Plans for Employers
A self-funded health plan puts the employer in control: instead of paying fixed premiums to an insurance carrier, the employer pays employee claims directly as they occur. A third-party administrator handles the day-to-day, stop-loss coverage limits exposure to large or unexpected claims, and any savings from lower-than-expected claims stay with the business.
Traditional fully insured plans often leave business owners paying for coverage they can’t customize and claims data they never see. Self-funding offers maximum flexibility and transparency, so you can design a plan around your workforce, manage healthcare spending directly, and keep the money you don’t spend on claims. Third-party administrators (TPAs) bring expertise in claims processing and customer service, while stop-loss insurance protects against catastrophic claims.
How Self-Funding Works
- Employer-Paid Claims: You fund employee claims as they’re incurred instead of paying a fixed premium
- TPA Administration: A third-party administrator processes claims, manages networks, and handles member service
- Stop-Loss Protection: Specific and aggregate stop-loss coverage caps your exposure on individual high-cost claims and total annual claims
- Savings Stay With You: When claims run lower than expected, you keep the difference, with no carrier profit margin built in
Who Is Self-Funding Right For?
Self-funding tends to be the right fit for mid-size to large employers with stable cash flow who want full control over plan design, complete access to their claims data, and the greatest potential for long-term savings.
Important Benefits of a Self-Funded Health Plan:
- Customize plan design to fit your employees’ needs
- Keep unspent claim dollars instead of paying them to a carrier
- Full access to claims data for smarter decision-making
- Avoid many state insurance mandates and premium taxes under ERISA
- Improved cash flow by paying claims as they occur
While we’re proud to call Pennsylvania our home, we’ve helped businesses all across the country manage their risk, and we look forward to helping you too, no matter where you call home.
Self-Funded Health Insurance FAQs
With a fully insured plan, an employer pays a fixed premium to an insurance carrier, and the carrier takes on the risk of paying claims. With a self-funded plan, the employer pays employee claims directly and takes on that risk, usually with stop-loss insurance to protect against high-cost claims. Self-funding offers more control over plan design, full access to claims data, and the chance to keep savings when claims run low.
Costs vary month to month because they depend on the claims your employees actually incur. The total cost generally includes three parts: claims, TPA administrative fees, and stop-loss premiums. Many employers find self-funding costs less over time than a fully insured plan because they avoid carrier profit margins and many state premium taxes, and they keep any unspent claim dollars.
There’s no legal minimum, but self-funding has traditionally been a fit for employers with 100 or more employees. With today’s stop-loss options, many businesses with as few as 50 employees can self-fund successfully. The bigger factors are stable cash flow, a healthy workforce, and the ability to handle month-to-month variation in claims.
Stop-loss insurance protects self-funded employers from unexpectedly large claims. Specific stop-loss covers individual claims above a set amount, such as a major surgery or cancer treatment. Aggregate stop-loss caps the employer’s total claims for the plan year. Together, they limit financial exposure and make self-funding a manageable option for more businesses.
