A self-insuring employer—also known as a self-funded employer—takes on the financial risk of providing health benefits to its employees. Instead of paying fixed premiums to an insurance company, the employer pays for actual claims out of its own funds.
Here's how they typically work with insurance companies or third-party administrators (TPAs):
Administrative Support
Employers often contract with insurance companies or TPAs to handle day-to-day operations.
These partners manage claims processing, customer service, provider networks, and compliance tasks.
Stop-Loss Insurance
To protect against catastrophic claims, employers purchase stop-loss insurance from an insurer.
This coverage reimburses the employer if claims exceed a certain threshold, either per individual or in aggregate
Plan Design and Customization
Employers have flexibility to design health plans tailored to their workforce.
Insurance companies may offer consulting services to help structure benefits, cost-sharing, and wellness programs.
Claims Funding
The employer sets aside funds to pay for employee medical claims as they arise.
This pay-as-you-go model can improve cash flow and reduce costs compared to fixed premiums.
Data and Analytics
Insurance partners provide detailed claims data and analytics.
Employers use this data to optimize plan design, manage risk, and improve employee health outcomes.
Regulatory Compliance
Self-insured plans are regulated federally under ERISA, not by state insurance laws.
Insurance companies or TPAs help ensure compliance with HIPAA, ACA, COBRA, and other federal mandates
References