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💰 '''Self-funded plan''' is an employee benefit arrangement in which an employer assumes the financial risk for providing [[Definition:Health insurance | health insurance]] or other covered benefits to its workforce, rather than purchasing a fully insured [[Definition:Group insurance | group insurance]] policy from a [[Definition:Insurance carrier | carrier]]. Under this model, the employer pays [[Definition:Claim | claims]] out of its own operating funds or a dedicated trust, effectively becoming the plan's risk bearer. Self-funded plans are most common among mid-size and large employers seeking greater control over plan design, [[Definition:Claims data | claims data]], and cost management.

⚙️ The mechanics rely on the employer setting aside reserves or establishing a trust fund from which eligible employee claims are paid as they arise. Most self-funded employers engage a [[Definition:Third-party administrator (TPA) | third-party administrator (TPA)]] to handle [[Definition:Claims administration | claims administration]], [[Definition:Provider network | network access]], and regulatory compliance on their behalf, even though the financial liability stays with the employer. To protect against unexpectedly large or catastrophic claims, employers almost always purchase [[Definition:Stop-loss insurance | stop-loss insurance]] — either on a [[Definition:Specific stop-loss | specific]] (per-claimant) or [[Definition:Aggregate stop-loss | aggregate]] (total plan) basis — which caps their maximum exposure in a given period.

🔍 The appeal of self-funding extends well beyond cost savings. Because these plans are generally governed by the federal [[Definition:Employee Retirement Income Security Act (ERISA) | Employee Retirement Income Security Act (ERISA)]] rather than state insurance mandates, employers gain flexibility to tailor benefits and avoid state [[Definition:Premium tax | premium taxes]]. For insurers and [[Definition:Insurtech | insurtech]] companies, the growth of self-funded plans has created substantial opportunities in stop-loss underwriting, [[Definition:Data analytics | data analytics]] platforms that help employers forecast claim costs, and TPA services. Understanding this funding model is essential for anyone operating in the employer-sponsored benefits ecosystem.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Stop-loss insurance]]
* [[Definition:Third-party administrator (TPA)]]
* [[Definition:Group insurance]]
* [[Definition:Employee Retirement Income Security Act (ERISA)]]
* [[Definition:Aggregate stop-loss]]
* [[Definition:Specific stop-loss]]
{{Div col end}}

Definition:Self-funded plan - Revision history

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