Instead of paying an insurance company to pay the claims (and keep any profits) a self-funded employer or plan puts money into a trust fund that is regulated by the federal government, and that trust fund pays the claims and keeps any profits on behalf of the plan.
In order to protect the employer from the financial burden under a partially self-funded plan, it is recommended that reinsurance or stop loss coverage is purchased in order to limit and cap the liability that the employer has under this agreement.
Third Party Administration selection is very important part of the self- funding process. If you don't have a TPA that will play the same game, it's hard to change anything.
Self-Funded vs. Level Funding
Partially self-funded plans offer an alternative to traditional health insurance plans. It allows companies to budget for small predictable claims while protecting the group against unpredictable catastrophic claims, through the purchase of stop-loss protection.
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