what is a self funded health plan

A self-funded health plan, also known as a self-insured plan, is a type of health insurance arrangement in which an employer provides health or disability benefits to employees using the companys own funds. In a self-funded plan, the employer assumes the direct risk for payment of the claims for benefits, and the terms of eligibility and covered benefits are set forth in a plan document which includes provisions similar to those found in a typical group health insurance policy. This is different from fully insured plans where the employer contracts an insurance company to cover the employees and dependents. Self-funded plans may be more flexible than traditional, fully-insured plans, and they offer businesses the opportunity to customize their health care plan to meet their unique business needs. Employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third party administrator, or they can be self-administered.