Self-Funded Insurance Plan

What is Self-Funded Insurance Plan?

A self-funded insurance plan is an arrangement in which the employer assumes the financial risk of providing healthcare benefits directly rather than purchasing a fully insured plan from a carrier. The employer pays claims out of its own funds, often using a third-party administrator to process claims and manage the plan. Self-funded plans offer greater flexibility in plan design, potential cost savings, and exemption from state insurance mandates under ERISA. Employers typically purchase stop-loss insurance to limit their exposure to catastrophic claims. Self-funding is most common among larger employers with sufficient cash flow to absorb claims variability.