A self-funded program is one in which the business pays the actual claims and essentially assumes the role of the insurance carrier. More common with larger companies — those with at least a couple hundred employees — the self-funded company retains the risk of paying for their employees’ health care themselves.
With healthy employees and few medical expenses, the self-funded company will immediately realize a positive impact on overall health care costs. On the other hand, unhealthy employees with surprise medical expenses, could become very costly. Self-funded companies often carry stop-loss insurance to reduce the risk associated with these surprise medical expenses.
An increasingly popular version of self-funding can be found in level-funded plans. Level funded plans have less risk than a self-funded plan, but offer some of the upside by sharing in the profits. They’re a nice middle ground between fully insured traditional plans and the self-funded plans mentioned here.
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