Self-Funded Health Plans: Understanding Your Employer-Based Coverage

What are Self-Funded Health Plans?

Self-funded health plans are offered by employers who assume the financial risk associated with providing health insurance to their employees. Unlike traditional plans where an insurance company is responsible for paying claims, self-funded plans utilize the employer’s funds to cover healthcare expenses.

Compliance with ACA Mandates

Although self-funded plans offer employers more flexibility, they cannot opt out of federal mandates under the Affordable Care Act (ACA). This means that self-funded plans must provide essential health benefits and cover preventive services without cost-sharing.

Advantages and Disadvantages


Employers have greater control over plan design and costs.
Potential cost savings for employers and employees.
More flexibility in plan offerings.


Employers assume greater financial risk.
Potential for higher out-of-pocket costs for employees.
Limited appeal process for claim denials.

Key Considerations

Before enrolling in a self-funded health plan, it is important to consider the following:

Compare coverage and costs:

Carefully review the plan document to understand the benefits and limitations compared to other options.

Assess financial stability:

Ensure that your employer has the financial capacity to cover potential expenses and claims.

Understand the appeals process:

In case of a claim denial, self-funded plans have limited appeal options compared to fully insured plans.

Important Points

Employers may self-fund plans to save costs or customize benefits.
Self-funded plans must still comply with ACA mandates.
Benefits and coverage vary widely between self-funded plans.
It is crucial to research and compare options carefully before enrolling.
Seek professional guidance from a licensed agent to ensure you have a comprehensive understanding of your health insurance coverage.

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