A health plan under which an employer assumes the responsibility and related financial risk for paying plan participants’ healthcare expenses is known as a self-funded health plan.

Stop loss coverage is often purchased to protect self-funded companies from high claims by putting a ceiling on financial risk.

In contrast, under a fully insured plan, an employer pays fixed monthly premiums to an insurance carrier, and the carrier assumes the responsibility and related financial risk for paying plan Participants’ claims.

Self-funded plans continue to allow employers to keep short and long-term costs under control. This, as well as the other advantages of self-funding—cash flow improvement, plan design flexibility and now, increased benefits under healthcare reform—are available to companies of all sizes and financial circumstances. In fact, businesses having as few as 50 employees can overcome the obstacles that formerly made it difficult for them to self-fund.

For example:

1. Stop loss carriers are becoming adept at working with smaller companies to mitigate financial risk.
2. Third Party Administrators (TPAs) provide a broad range of services to supplement the human resources capabilities of small and mid-sized companies.
3. Experienced health plan consultants help companies design plans to meet the needs of diverse workforces.

These resources put the benefits of self-funding within the reach of small and mid-sized groups.