What is Self-Funding?

When traditional health insurance no longer meets an employer’s needs, many companies turn to self-funding as a way to regain control. With self-funding, employers have full control over the plan design, administration, and finances for the health benefits they provide to their employees.

When self-funded, the employer pays for health claims as they occur. The benefits are administered by a third party administrator (TPA) or by an administrative services only (ASO) insurer. The employer can purchase Stop Loss insurance to limit its liability for catastrophic and unexpected claims.

Employers who self-fund take on the financial risk of paying their own claims in exchange for regaining control over their benefits and the opportunity for cost savings.

How self-funded health plans work

With a self-funded plan, employers have full control over plan design, administration, and finances of the benefits they provide to their employees. Self-funding differs from fully insured plans in several ways:

  • The employer chooses what benefits it will cover and at what level.
  • The employer pays for exact amount of the medical costs each month, rather than paying a fixed premium to an insurer.
  • The employer decides what extra services to offer, such as a wellness program, nurse hotline, or maternity program, based on the needs of their employees.
  • The employer hires a third party administrator (TPA) to process claims, issue ID cards, determine eligibility, and more.
  • The employer owns its own claims data. Employers can see where their health care dollars are going and tailor risk management programs to meet the needs of their group.

Who is a good candidate?

Self-funding is not right for every group. It is not a quick fix, but is part of a company’s long-term risk management strategy. The best candidates for self-funding are companies with:

  • Stable workforce with good claims experience
  • Strong balance sheet and financial ability to assume some risk
  • Leadership committed to controlling costs

What are the advantages of self-funding?

Learn about the pros and cons of self-funding and how it compares to fully insured plans.

To learn more, contact your broker or Berkley Accident and Health representativeFind an Expert

Insurance coverage is underwritten by Berkley Life and Health Insurance Company and/or StarNet Insurance Company, both member companies of W. R. Berkley Corporation and both rated A+ (Superior) by A.M. Best. Not all products and services may be available in all jurisdictions, and the coverage provided is subject to the actual terms and conditions of the policies issued. Payment of claims under any insurance policy issued will only be made in full compliance with all United States economic or trade and sanction laws or regulation, including, but not limited to, sanctions, laws and regulations administered and enforced by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).

| a Berkley Company

Important COVID-19 Updates

We’re here to help. At this unprecedented time, Berkley Accident and Health is ready and able to serve you and your business needs. We are fully functional in all operational areas, and we’re experiencing no interruptions in our service to you.

Learn about our COVID-19 response and get the latest updates

Visit our COVID-19 Resource Center >