Most business owners face a tough choice when it comes to employee health benefits: pay predictable monthly premiums or take control of actual healthcare costs. The difference between self-funded insurance vs fully insured plans can mean thousands of dollars in savings or budget certainty, depending on what works best for your company.
Self-funded insurance flips the script on traditional employee benefits insurance. Your company pays employee medical bills directly instead of sending monthly checks to an insurance carrier. When someone gets sick or needs surgery, those costs come out of your healthcare fund, not the insurance company’s pocket:
Think of self-funded insurance plans like having your own company health savings account. You set aside money each month to cover employee medical expenses. When someone needs care, you pay the bill directly from this fund instead of an insurance company handling it.
Here’s what makes self-funded health benefits different:
The biggest advantage? If your employees stay healthy, you keep the savings instead of handing them over to an insurance carrier.
Third-party administrators run the day-to-day business of your health plan without touching your money. They process medical bills, negotiate with hospitals and doctors, and make sure you follow all the government rules. You stay in charge of spending decisions and benefit choices while they handle the paperwork and phone calls that keep everything moving.
Stop-loss insurance works like an umbrella policy for your self-funded health plan. It kicks in when medical bills get too expensive for your company to handle alone. You pay for routine doctor visits and prescriptions, but stop-loss coverage takes over when costs hit dangerous levels.
Two types of stop-loss protection cover you:
The bottom line? You get the cost savings of self-funding with a financial safety net that prevents one bad year from breaking your budget.
Fully insured plans let you pay one monthly bill and walk away from healthcare administration. You send a check to an insurance carrier, and they handle everything else. You get predictable costs without managing claims or dealing with medical bills:
Insurance companies combine payments from many employers to create stable coverage pools. When employees need medical care, claims get paid from this shared resource. Your coverage stays consistent year after year, whether your workforce has high or low healthcare usage.
Fully insured plans bundle everything into one monthly bill. Your payment covers:
Monthly bills stay the same throughout your policy year, making budgeting easy.
Fully insured plans meet all state insurance regulations automatically. These requirements protect employee rights and establish clear procedures for claims and appeals. Your benefits program stays compliant with changing laws while providing comprehensive protections for your workforce without extra work on your end.
Self-funded and fully insured plans work completely differently when it comes to money. Each has real financial benefits depending on what your business needs and how much risk you’re comfortable with:
With self-funding, you pay medical bills as they come in and keep whatever’s left over. Fully insured plans charge you the same amount every month whether your employees use their benefits or not.
Self-funded plans give you direct control over healthcare spending:
Fully insured plans deliver financial stability:
Self-funded plans show you exactly what you pay for plan management. You get separate bills for TPA work, stop-loss coverage, and compliance help. When you can see what each piece costs, you can shop around and get better deals. Fully insured plans bundle all administrative costs into your monthly premium, giving you one simple payment without having to manage multiple vendor relationships.
Self-funded plans can save you big money over time if your employees stay reasonably healthy. Companies with stable workforces find multiple ways to use these savings:
Fully insured plans offer different long-term value through consistent budgeting and risk protection. Companies benefit from predictable costs that make multi-year financial planning easier, plus protection from unexpected healthcare trends that could impact their bottom line.
Conner Insurance has been helping mid-sized businesses choose between self-funded and fully insured health plans for over 70 years. We look at your workforce, budget, and comfort with risk to figure out which approach works best for your situation. Whether you want self-funding with our TPA partners and stop-loss coverage, or fully insured plans from one of our many carriers, we’ll help you make the right choice. Three generations of our family has learned what actually works for companies in manufacturing, healthcare, schools, and other industries where healthcare decisions matter.
Call us at (317) 808-7711 to talk through your options and find the health benefits solution that fits your business.RetryClaude can make mistakes. Please double-check responses.
The difference between fully insured and self-funded insurance comes down to who pays the medical bills. With fully insured plans, you pay fixed monthly premiums and the insurance company covers all employee medical expenses, while self-funded plans have you pay medical claims directly from your own money with stop-loss insurance backing you up for big claims.
Most companies need at least 50 full-time employees to make self-funding work, though smaller groups can sometimes qualify based on their claims history and financial stability. Self-funded plans get more attractive as your workforce grows because you spread risk across more people and get more predictable healthcare spending patterns.
Companies choose self-funding mainly to control costs and see where their healthcare dollars actually go. You keep any money left over from low claims years instead of handing it to an insurance company, plus you get detailed reports on spending and can design benefits that actually fit your workers instead of taking whatever the insurance company offers.
Self-funding works well for financially stable businesses with 50 or more employees who want control over their healthcare spending. It makes the most sense for companies that want to see exactly what they’re paying for and can handle monthly bills that go up and down based on how much healthcare their employees actually use.
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