Reach More Customers With Level- and Self-Funded Health Insurance Faster

Self-funded health plans, also known as self-insured health plans, offer employers a powerful way to take control of their health coverage. With a self funded health plan, the employer pays for the health benefits of employees directly, rather than paying a fixed premium to an insurance company. This approach gives self-funded employers the flexibility to design a health plan that meets the unique needs of their workforce, manage costs more effectively, and respond quickly to changing healthcare needs.

By choosing a self-funded health plan, employers only pay for the actual claims incurred by employees, which can lead to significant cost savings compared to traditional insurance. However, self-funded health plans also mean the employer assumes the risk for high claims. To protect against unexpected, high-cost claims, many employers purchase stop-loss insurance, which reimburses the employer if claims exceed a certain threshold. This combination of control, flexibility, and risk management makes self-funded health plans an attractive option for many larger organizations seeking to optimize their health benefits and manage healthcare costs.

With HIT's insurtech and risk management solutions, now insurance professionals and small to mid-size businesses can create level-funded health benefits, a form of self-funding, which offers many of the same advantages as traditional self-funded plans for large organizations.

When it comes to providing health coverage, employers typically choose between fully insured health plans and self-funded health plans. With fully insured health plans, the employer pays a fixed insurance premium to an insurance carrier, which then assumes the financial risk and pays claims on behalf of the employees. This model offers predictability but often comes with less flexibility and higher overall costs.

In contrast, self-funded health plans shift the responsibility for paying claims from the insurance carrier to the employer. The employer pays claims as they arise, which can result in lower costs and greater control over plan design and benefits. However, this also means the employer takes on more risk, especially if claims are higher than expected. The choice between fully insured and self funded plans impacts not only funding and risk management, but also the overall health care cost and customization of health benefits for both employers and employees.

Self-funded health plans are primarily governed by federal law, specifically the Employee Retirement Income Security Act of 1974 (ERISA). This legislation sets minimum standards for plan administration, claims payment processes, and appeals procedures. Unlike fully insured plans, where the insurance company is responsible for paying claims, self-funded employers are directly responsible for claims payment and may face liability in the event of disputes or denied benefits.

Because self-funded health plans are subject to federal law rather than state insurance laws, employers must ensure their plans are properly documented and administered to minimize legal risks. Accurate record-keeping, clear plan terms, and compliance with ERISA requirements are essential for protecting both the employer and employees. Understanding the regulatory environment is key to successfully managing a self-funded health plan and avoiding costly legal challenges.