Q&A Topics

Tuesday, September 16, 2014 11:56:52 AM

What is a self-funded health plan?

In a self-funded health insurance plan, an employer collects premiums from employees and pays medical claims out of the collected pool. This type of plan contrasts with traditional group health insurance, in which premiums are paid directly to the insurance company.

Self-funded plans are relatively common among large employers, which often use an insurance company to manage claim processing and other administrative duties, but can save on costs by insuring employees with their own funds rather than paying premiums to an insurer.

Employers also generally invest in “stop-loss” insurance, which can limit their damages against catastrophic-level health care claims.

Self-funded health plans aren’t subject to the Affordable Care Act’s requirements, so some self-funded plans may be more limited in their benefits than those in the heavily regulated Health Insurance Marketplace.

However, employers are able to tailor self-funded health plans to the needs of their employees, so they may be able to offer less common benefits that fit the needs of people working within your organization.