Self-Funded Health Insurance Plan

Published: | Updated: April 15, 2018

Definition - What does Self-Funded Health Insurance Plan mean?

A self-funded health insurance plan is coverage provided by an employer for their employees. Instead of purchasing the plan through an insurance company, however, this plan is entirely funded by the employer. The aim of the self-funded insurance plan is to cut costs, especially for large companies.

Insuranceopedia explains Self-Funded Health Insurance Plan

When offering a self-funded health insurance plan, the employer or the organization becomes its workers' insurer. Insurance companies may still be involved, however, since companies that offer self-funded health insurance usually buy stop-loss insurance. This coverage limits the payout to a certain amount. After reaching that threshold, the stop-loss insurance steps in to pay the excess.

Since a company using this type of plan acts as the insurance administrator, it is also responsible for informing enrollees about any developments or updates to the plan.

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