Self-funded vs. fully insured health insurance

As an employer, choosing the right health insurance plan for your employees can seem challenging. There are typically two different options: a fully insured plan vs. a self-funded plan.

Each plan has different pros and cons. Taking stock of your priorities is a good place to start. Consider:

• Company size
• Health needs
• Budget
• Risk
• Employee experience

Once you have a good idea of what you can afford and what you’d like to cover for your employees, it’s time to choose your approach.

What is a fully insured health plan?

A fully insured health plan is what most people picture when they think of health insurance. The employer pays a premium to an insurance company. In return, the insurance company provides health coverage for insured events. Costs for the employer are more predictable than with a self-funded plan, reducing risk in uncertain times.

What is self-funded health insurance?

A self-funded (or self-insured) health plan is when the employer acts as its own insurer. The employer assumes most or all costs of benefit claims. In most cases, employers usually contract with an another company to administer their self-funded plan. This “third-party administrator” (TPA) manages certain functions, such as processing medical claims and facilitating enrollment.