A self-insured health plan is a health insurance plan in which the employer offering the plan directly assumes most or all of the financial risk of providing benefits to its employees. The employer either collects or funds a pool of premiums and pays all health care claims for its employees out of that pool, as opposed to a fully insured plan in which the employer would pay fixed premiums to an insurer that then pays the claims under a fully insured plan. Some self-insured employers contract with insurance carriers or third party administrators for claims processing and other administrative tasks, typically paying a transaction fee for each claim as it is incurred.
Some self-insured plans bear the entire risk. Other self-insured employers insure against higher-than-expected claims through stop-loss coverage. This coverage limits the employer’s liability for claims by covering any amount above either a specific threshold for an individual (specific stop-loss coverage) or when the total outlays for group claims reach a certain amount (aggregate stop-loss coverage).
Self-insured health plans are regulated by federal rules, as opposed to fully insured health plans, which are regulated by states. The federal Employment Retirement Income Security Act (ERISA) covers the self-insured plans.
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