Self-Funded (Self Insured) Plan

Posted in Human Resources Terms, Total Reads: 1195

Definition: Self-Funded (Self Insured) Plan

A self-funded plan is a form of insurance coverage offered by employers for medical benefits of their employees. Unlike a full insured plan where the employer enters into a contract with an insurance company to provide coverage for employees and their dependents, a self-funded plan is run by the employer’s own funds.

The difference between the two plans lies in the ownership of the risk with the employer assuming the risk for claims of its employees in a self-insured plan. On the other hand, in a full insured plan, the same risk is transferred to the insurance provider in exchange for a premium in proportion to the number of employees enrolled for the plan.The self-funded plan’s cost has fixed components like administration fees, stop-loss premium and any other set fees charged per employee and variable costs which include the claims expense.

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