A self-insured health plan (also known as a self-funded health plan) is coverage offered by an employer or association in which the employer (or association) takes on the risk involved with providing coverage, instead of purchasing coverage from an insurance company.
According to a Kaiser Family Foundation analysis, 61 percent of covered workers are in plans that are either fully or partially self-funded plans, including 80 percent of covered workers at large companies.
Self-insured health plans are not subject to state insurance regulations. Instead, they’re regulated at the federal level, under ERISA. So for example, if a state requires health plans to cover services like bariatric surgery or infertility treatment, or add additional state continuation after COBRA is exhausted, those requirements would not apply to self-funded health plans.
Self-insured health plans can be administered by the employer or association, but it’s common for a third-party administrator (TPA) to be used. The TPA is often a commercial insurance carrier, so the employees’ ID cards might have the name of an insurance carrier on them, and the plan might use that insurer’s provider network. But a TPA is only administering the plan; the employer is still taking on all of the financial risk and covering the cost of employees’ claims.