With a self-funded plan, the employer sets aside funds to cover the expected claims and works with a third-party administrator to process the claims. Rather than paying a monthly premium to the insurance company, the employer only pulls from the fund as employees seek care. This allows the employer to typically come out ahead financially versus a fully insured plan’s cash flow and costs.
Because self-insured employers “pay as they go,” they can potentially achieve significant savings if actual claims fall below their estimated claims. They can reinvest the savings back into the business, lower employee premiums, or expand coverage and employee benefits.