Fully insured plans
The employer pays a set premium to an insurance carrier, and the carrier pays employees' claims. Costs are predictable for the plan year, but premiums are reset at each renewal and can rise significantly.
Self insured (self-funded) plans
The employer pays claims directly, usually with a third-party administrator handling processing. Many employers buy stop-loss insurance to cap large losses. If claims are low, the employer may keep the savings; if claims are high, costs rise.
Side-by-side comparison
| Factor | Fully insured | Self insured |
|---|---|---|
| Who pays claims | The insurance carrier | The employer, from company funds |
| Employer cost | A fixed premium set at renewal | Actual claims plus administration and any stop-loss coverage |
| Who carries the risk | The carrier | The employer, often limited by stop-loss insurance |
| Budget predictability | High within the plan year | Lower; costs move with claims |
| Plan design flexibility | Limited to carrier options | Greater flexibility |
| Typical regulation | State insurance rules | Generally federal ERISA rules |
Why some businesses look beyond both
Switching between fully insured and self insured shifts risk, but either way premiums or claims are still paid from operating cash flow. Some established businesses instead ask a different question: could financial resources they already control be repositioned to generate income that helps offset health insurance costs?
This approach can work alongside an existing plan without changing employee coverage. It is not right for every company, and any strategy may involve fees, investment risk, liquidity changes, and tax consequences. Income and premium offsets are not guaranteed.
This guide is general information, not legal, tax, or insurance advice. Speak with qualified advisors about your company's situation.