Self-funded health insurance
In a self-funded plan the employer pays employees' claims as they arise, usually through a third-party administrator, instead of paying a premium to an insurer that takes the risk. Stop-loss insurance caps the losses.
It is how most covered workers in the US get their health cover: 71% in 2026, rising to 85% at firms with 200 or more workers and 25% at smaller firms, according to the KFF 2026 Employer Health Benefits Survey.
A free matching service for employers, not a broker or insurer. We introduce you to a licensed broker and tell you who they are before anything is shared. No plan, tax or legal advice. How it works
Why employers move to self-funding
- You keep the money when claims are lower than an insurer would have priced in.
- You can design the plan to fit your workforce rather than choose from a carrier's list.
- Self-funded plans are regulated under federal ERISA rules rather than most state insurance mandates.
- You see detailed claims data, which helps plan wellness and network choices.
- Cash flow: you pay claims as they happen instead of a full premium up front.
- Multi-state employers can run one plan design everywhere.
Who self-funds, KFF 2026
| Covered workers in self-funded plans | Share |
|---|---|
| All firms Including level-funded plans | 71% |
| Larger firms 200 or more workers | 85% |
| Smaller firms 10 to 199 workers | 25% |
| Smaller firms in level-funded plans A self-funded arrangement sold as a package | 38% |
Source: KFF 2026 Employer Health Benefits Survey, published October 22, 2026. National averages for firms with 10 or more workers, weighted by covered workers. Not a quote or a rate for your business.
Six things to settle before self-funding
A broker with self-funded experience should walk you through each one with numbers for your group.
Stop-loss levels
Specific (per person) and aggregate (whole group) limits, what they cost, and whether the contract allows lasering, where one person gets a higher limit.
Third-party administrator
Who processes claims, which network they rent, their fees and their service standards.
Pharmacy benefit manager
How drug claims are handled and priced, and whether rebates come back to the plan.
Cash flow and reserves
How much you should hold for a bad month, and how claims are funded week to week.
Fiduciary duties
Under ERISA the employer is the plan sponsor and a fiduciary. Ask what that means in practice, and get legal advice on it.
Exit plan
What it costs to return to a fully insured plan, including claims incurred before you leave.
Thinking about self-funding? A licensed broker who works with self-funded groups can model it against your current plan.
Find a licensed brokerMoving to a self-funded plan
Feasibility
Claims history (if available), headcount, cash position and appetite for year-to-year variation.
Market the pieces
Administrator, network, pharmacy benefit manager and stop-loss are quoted, sometimes as a bundle.
Plan document and notices
An ERISA plan document, summary plan description and the required notices are drafted.
Run and review
Monthly claims reports, an annual stop-loss renewal and a review of the plan design each year.
Questions people ask
How many employees do you need to self-fund?
There is no legal minimum. Traditional self-funding is most common at 200 or more covered workers, while level-funded programs bring a version of it to groups as small as 10 or so. A broker can tell you what is realistic for your size and state.
What is stop-loss insurance?
Insurance the employer buys to cap its claims risk. Specific stop-loss pays when one person's claims pass a set amount; aggregate stop-loss pays when the whole group's claims pass a yearly total. It protects the employer, not the employee directly.
Are self-funded plans subject to state insurance law?
Mostly not. Self-funded employer plans are governed by the federal ERISA law, which generally pre-empts state insurance mandates. Some federal rules (including parts of the ACA and mental health parity) still apply. Get legal advice on your plan.
Is self-funding riskier than a fully insured plan?
Your costs can vary more from year to year, and a single high-cost claim affects your renewal. Stop-loss limits that risk within a year. Many employers accept the variation in exchange for keeping savings in good years.
Do employees notice the difference?
Usually very little. They get an ID card, a network and a plan design as with any plan. The administrator's name may appear instead of an insurer's.
Ask a broker about self-funding
Three short steps: where the business is, what you have now, and who to speak to. It takes about two minutes and asks nothing about anyone's health.
- Free for employers. The broker pays us a flat fee per introduction.
- One broker, named to you first, with their state license number.
- No advice from us. Plans, rates and tax questions go to the licensed broker.
We are a free matching service, not a broker or insurer, and we do not quote or recommend plans. We look for a licensed benefits broker who suits your business and tell you who it is; your enquiry goes to them only with your go-ahead.
Thanks, your enquiry is in.
- Within one business day we will email or call to tell you which licensed benefits broker we have found, with their license number.
- Your details reach that broker only if you say yes.
- The broker reviews your renewal or your options and talks you through them. Whether to work with them is your choice. No marketing from us, ever.