Health Insurance
Self-Funded Plan
In a self-funded plan, the employer functions as the insurer — paying claims from its own funds — while typically contracting with a TPA or insurer for administrative services.
Last reviewed: May 2026 · Editorial methodology
Definition
A self-funded (or self-insured) health plan is an arrangement in which the employer assumes direct financial responsibility for employees' medical claims, rather than purchasing a fully insured group health policy where the insurance company bears the risk. Instead of paying monthly premiums to an insurer, the employer funds a claims account from which covered medical expenses are paid. Most self-funded employers contract with a Third-Party Administrator (TPA) or an insurance carrier acting as an ASO (Administrative Services Only) provider to handle claims processing, network access, and member services. Self-funded plans are subject to ERISA and largely exempt from state insurance mandates and premium taxes, allowing employers to customize benefits and potentially reduce costs. Stop-loss insurance is almost always purchased alongside self-funding to protect against catastrophically large individual claims (specific stop-loss) or aggregate claims that far exceed projections (aggregate stop-loss). Self-funded plans are most common among large employers but have grown among mid-size businesses seeking greater cost control.
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Cover Forge USA Editorial Team
Editorial Lead
This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.
Reviewed 2026-06-14
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