Healthcare costs keep rising, with many experts projecting significant increases again next year. Because of this, more employers are asking: What is a self-funded health plan, and could it help control our costs?
In simple terms, a self-funded health plan (also called self-insured) means your company pays the actual medical claims for your employees instead of paying fixed monthly premiums to an insurance company.
You take on the financial risk, but you gain more control and potential savings.
How Self-Funded Plans Protect Against Big Risks
To limit your exposure, most employers buy stop-loss insurance. This acts like a safety net that kicks in and pays if claims get too high, putting a ceiling on your company’s financial risk.
Self-Funded vs. Fully Insured Plans: What’s the Difference?
- Fully Insured Plan: You pay a fixed monthly premium to an insurance carrier. The carrier handles all claims and assumes the risk. It’s predictable but often more expensive over time.
- Self-Funded Plan: You pay for the actual healthcare expenses as they happen. You keep any savings if claims are low, and you get greater flexibility in plan design.
Many employers find self-funding helps them avoid insurance company profits, state premium taxes, and unnecessary costs built into traditional plans.
Key Advantages of Self-Funded Health Plans
Self-funded plans offer several clear benefits:
- Better cost control — You only pay for the care your employees actually use, not inflated premiums.
- Improved cash flow — You don’t prepay large fixed premiums; funds stay in your business longer.
- Plan design flexibility — Customize benefits to better fit your workforce (e.g., add wellness programs or adjust deductibles).
- Access to valuable data — See detailed claims information to spot trends and manage costs more effectively.
- Potential savings — Especially helpful when your group is relatively healthy.
These advantages, plus options available under healthcare rules, make self-funding attractive for companies of many different sizes.
Can Small and Mid-Sized Businesses Self-Fund?
Yes! Self-funded health plans are no longer just for large corporations. Businesses with as few as 50 employees (and sometimes even smaller) can now successfully self-fund.
Here’s why it’s more accessible today:
- Stop-loss carriers specialize in working with smaller groups to reduce financial risk.
- Third-Party Administrators (TPAs) handle claims processing, ID cards, and day-to-day administration — making it easy even if your HR team is small.
- Experienced consultants help design a plan that matches your employees’ needs without overwhelming your resources.
These support services remove many of the old barriers and put the benefits of self-funding within reach for small and mid-sized employers.
Is a Self-Funded Health Plan Right for Your Business?
If you want more control over rising healthcare costs and a plan that truly fits your team, self-funding (or level-funded hybrid options) may be worth exploring.
Would you like to learn more about whether a self-funded health plan could save your company money while keeping strong benefits for employees?
Contact us today for a no-obligation review of your current plan and a simple comparison of self-funded vs. fully insured options. Our team can help you understand the pros, cons, and next steps tailored to your business size and goals.