A self-funded health arrangement involves an employer assuming the financial risk for providing healthcare benefits to its employees. Instead of paying premiums to an insurance carrier, the organization pays for healthcare claims directly out of its own assets. This approach contrasts with a fully-insured plan where the employer pays a premium to an insurance company, which then assumes the risk and pays covered healthcare claims.
This risk assumption allows for greater flexibility in plan design and cost management. The employer has the opportunity to customize its benefits package to meet the specific needs of its workforce. Cost savings can potentially be achieved through effective wellness programs, claims management strategies, and negotiated provider discounts. Historically, this type of arrangement has been more common among larger organizations with sufficient resources to manage the financial risks and administrative burdens.
