Employee Benefits
Self-Funded Medical Plan Consulting — Take Control of Your Health Plan Costs
Self-funded health plans give employers direct visibility into claims, control over plan design, and the ability to keep surplus when employees are healthy. We provide the actuarial analysis, vendor expertise, and ongoing consulting to make self-funding work for your organization.
What is a Self-Funded Health Plan?
In a self-funded arrangement, the employer assumes the financial risk of providing health benefits directly — paying claims as they occur rather than paying a fixed premium to a carrier.
How Claims Are Paid
Instead of paying a monthly premium, the employer funds a claims account and pays employee medical claims directly. Claims are administered by a Third Party Administrator (TPA) on the employer's behalf.
Stop-Loss Insurance
Stop-loss (excess loss) insurance protects the employer from catastrophic claims. Specific stop-loss covers individual high-cost claimants above a set threshold. Aggregate stop-loss caps total annual claims liability.
Third Party Administrator (TPA)
A TPA administers the plan — processing claims, managing provider networks, handling appeals, and ensuring regulatory compliance. The TPA is selected separately from the funding arrangement.
Plan Design Flexibility
Self-funded employers have far more flexibility in plan design than fully-insured groups — customizing deductibles, copays, networks, carve-outs, and benefit exclusions based on their workforce's actual needs.
ERISA Preemption
Self-funded plans are governed by ERISA, which preempts most state insurance mandates. This gives employers — especially those in multiple states — the ability to offer a single uniform plan design across their entire workforce.
Employee Experience
When structured correctly, self-funded plans can deliver equivalent or better employee benefits at lower total cost — without sacrificing network access or care quality.
Is self-funding right for your organization?
Self-funding is appropriate for a wide range of employers. The right fit depends on workforce size, health risk profile, cash flow, and risk appetite.
- Typically considered at 50+ enrolled employees
- Level-funded plans bring self-funding to smaller groups
- Consistent claims history makes risk more predictable
- Healthier, younger workforces often benefit most
- Multi-state employers benefit from ERISA preemption
- Employers with strong cash flow can absorb monthly variance
Fully-insured vs. Self-funded — the key difference
- Fully-insured: fixed premium regardless of actual claims
- Self-funded: pay actual claims — save when healthy, exposed when not
- Stop-loss protects against catastrophic individual or aggregate claims
- Self-funded employers keep surplus when claims are below projections
- Fully-insured carriers keep all surplus — never returned to employer
The Components of a Self-Funded Plan
A self-funded health plan is assembled from several distinct components — each selected to optimize cost, network quality, and employee experience.
Stop-Loss Insurance
The financial safety net that makes self-funding viable. Specific stop-loss protects against any single claimant exceeding the deductible. Aggregate stop-loss limits total annual claims exposure.
- Specific deductible: $20,000–$150,000+ per claimant
- Aggregate cap: 115–125% of expected claims
- Annual vs. run-in/run-out contract terms
- Laser provisions for known high-cost claimants
Third Party Administrator (TPA)
The TPA handles day-to-day plan administration — claims processing, provider billing, eligibility, appeals, and compliance reporting. TPA selection significantly affects cost and employee experience.
- Claims processing and adjudication
- Utilization management and prior auth
- Compliance and reporting (ACA, ERISA)
- Employee customer service
Pharmacy Benefit Manager (PBM)
Specialty drug costs are often the single largest driver of self-funded plan costs. An independent PBM relationship gives employers leverage to negotiate drug pricing and formulary design.
- Formulary management and drug pricing
- Specialty drug management programs
- Manufacturer rebate pass-through
- GLP-1 and specialty drug strategy
Provider Network
Network access can be achieved through the TPA, a standalone network rental, or innovative reference-based pricing models — giving employers flexibility to optimize cost and access.
- Traditional PPO network rental
- Reference-based pricing (RBP)
- Direct primary care (DPC) integration
- Center of excellence programs
Care Management Programs
Utilization management, disease management, and care coordination programs reduce unnecessary claims and improve outcomes for employees with chronic conditions — the primary driver of plan costs.
- Disease management (diabetes, cardiac)
- Maternity management programs
- Behavioral health integration
- High-cost claimant case management
Captive Arrangements
Group captives allow smaller employers to pool their stop-loss risk with similar organizations — accessing self-funding benefits at lower minimum thresholds while spreading catastrophic risk across a larger pool.
- Access self-funding at 25–100 employees
- Pool stop-loss risk with peer employers
- Profit sharing from favorable experience
- Single-parent and group captive options
Our Consulting Approach
Self-funded plan consulting requires a different skillset than traditional group health brokerage. We bring actuarial analysis, vendor expertise, and plan design experience to every engagement.
Claims Analysis & Actuarial Review
We analyze your historical claims data to understand utilization patterns, identify cost drivers, and model the financial implications of moving to a self-funded structure — including stop-loss pricing and expected claims volatility.
Vendor Selection & Benchmarking
We conduct a structured RFP process for TPA, stop-loss, PBM, and network vendors — benchmarking pricing and contract terms against market standards and your peer group.
Financial Modeling
We model the expected cost range of self-funding versus your current fully-insured program — including best case, expected, and worst case scenarios — so you can make an informed decision about risk assumption.
Plan Document & Compliance
Self-funded plans require a Summary Plan Description (SPD), plan document, and ongoing ERISA compliance. We coordinate with legal counsel to ensure your plan documents are complete and compliant.
Stop-Loss Strategy & Negotiation
Stop-loss is not a commodity. Contract terms, lasering provisions, corridor provisions, and run-in/run-out agreements significantly affect your actual risk exposure. We negotiate aggressively on your behalf.
Employee Communication
A successful transition to self-funding requires clear employee communication. We develop materials that explain the change, address common concerns, and maintain employee confidence in their benefits.
Ongoing Analytics & Reporting
We provide quarterly claims reporting, pharmacy analysis, and plan performance benchmarking — giving you the data you need to make proactive adjustments before costs escalate.
Specialty Drug Strategy
Specialty and GLP-1 drugs now represent 50%+ of pharmacy spend for many self-funded plans. We help employers develop strategies for managing these costs without compromising employee access to needed medications.
Level-Funded Plans — Self-Funding for Smaller Employers
Level-funded plans bring the core benefits of self-funding to employers as small as 10–50 employees — with the simplicity of a fixed monthly payment and the upside of claims surplus refunds.
How Level-Funded Plans Work
Employers pay a fixed monthly amount — similar to a fully-insured premium — that covers expected claims, stop-loss insurance, and administration. At year-end, unused claims funds are refunded to the employer.
- Fixed monthly payment — predictable cash flow
- Claims surplus refunded at year-end
- Stop-loss protects against high-cost claimants
- Access to claims data (unlike fully-insured)
- More plan design flexibility than fully-insured
- Available to groups as small as 10–25 employees
Level-Funded vs. Fully-Insured vs. Self-Funded
Understanding where level-funded fits in the spectrum helps employers make the right decision for their size and risk tolerance.
- Fully-insured: most predictable, least control, no surplus
- Level-funded: fixed payment, claims visibility, potential surplus
- Traditional self-funded: maximum control, maximum flexibility, variable cash flow
- Level-funded is the logical step between fully-insured and self-funded
- Many employers use level-funded as a stepping stone
Common Questions
-
There is no hard minimum, but traditional self-funding is typically evaluated at 50+ enrolled employees. Level-funded plans are available to groups as small as 10–25 employees. Group captives can make self-funding viable for smaller employers as well. We'll help you determine which structure is appropriate for your size.
-
Stop-loss protects self-funded employers from catastrophic claims. Specific stop-loss covers individual claimants who exceed a set threshold (e.g., $50,000 per person per year). Aggregate stop-loss caps total annual claims at a percentage of expected claims (e.g., 125%). While not legally required, stop-loss is essentially universal among self-funded employers — operating without it would expose the organization to unlimited claims liability.
-
In a fully-insured plan, you pay a premium to an insurance carrier who assumes all claims risk. In a self-funded plan, you pay claims directly (administered by a TPA) and purchase stop-loss insurance to protect against catastrophic claims. You assume the financial risk — and keep the savings when claims are lower than expected.
-
To properly analyze whether self-funding makes sense, we need 24–36 months of fully-insured claims experience (carrier claims reports), current premium and enrollment data, employee demographics (age, family tier breakdown), and current plan design. Carriers are required to provide this data under ACA regulations.
-
From an employee's perspective, a well-designed self-funded plan looks and feels identical to a fully-insured plan — same network access, same ID cards, same claims process. The difference is entirely on the employer's side. Employees should be informed of the change but typically see no difference in how they access care.
-
Self-funded plans are governed by ERISA, which requires a formal plan document, a Summary Plan Description (SPD) provided to employees, Form 5500 annual filing for plans with 100+ participants, and compliance with ACA requirements including mental health parity, preventive care mandates, and non-discrimination rules. We coordinate with legal counsel to ensure full compliance.
Find out if self-funding is right for your organization.
We'll analyze your claims history, model the financial scenarios, and give you an assessment of whether self-funding makes sense — and which structure fits your size and risk appetite.