Definition

• Self-funded insurance is a coverage plan in which the employer pays for health claims, rather than relying on an insurance company to cover claims.
  
  

Regulation

• There are federal and state regulations in place to oversee self-funded plans. These regulations help ensure that the employer will be able to pay health claims.
  
  

Reinsurance

• Most employers that offer self-funded plans purchase reinsurance to cover large losses. Reinsurance is an insurance policy that kicks in after a self-funded plan has paid a certain amount for a claim or has paid a certain aggregate amount for all employees.
  
  

Choice and Efficiency

• Self-funded insurance allows employers to offer greater coverage choices than might otherwise be available to employees. It also allows claims to be handled more efficiently, so claims can be paid more quickly.
  
  

Cost

• Because self-funded insurance involves fewer administrative costs, many employers can provide health insurance at lower premium rates.