Employers with self-funded (or self-insured) plans retain the risk of paying for their employees’ health care themselves, either from a trust or directly from corporate funds.
Most employers with more than 200 employees (although it really does depend on the scenario) self-insure some or all of their employee health benefits. Many employers with fewer than 200 employees also choose to self-fund, but these employers require greater stop-loss insurance protection than larger employers.
The risk assumed in either situation is the chance that employees will become ill and require costly treatment. When employees have few claims and few expensive illnesses, the self-funded employer realizes an immediate positive impact on overall health care costs, hence why workplace wellness programs are crucial to the success of self-funded programs.
Conversely, if the employee group has unfavorable claims experience, a self-funded employer would incur an immediate expense beyond what may have been expected. Insured plans have a more predictable cost for the year; however, large employee claims costs from one year can affect future premium amounts.