Direct answer
In a self-funded plan, the employer assumes the financial risk for providing health care benefits to employees instead of paying fixed premiums to an insurance carrier. The employer pays for medical claims directly as they are incurred, often using a third-party administrator to manage the processing.
Internal Revenue Service guidance on employer-sponsored health coverage and benefit plan structures. For additional information about the regulatory frameworks governing these arrangements, see the Internal Revenue Service‘s guidance on health plans.
What this means for you
In a self-funded plan, the employer assumes the financial risk for providing health care benefits to employees instead of paying fixed premiums to an insurance carrier. The employer pays for medical claims directly as they are incurred, often using a third-party administrator to manage the processing.
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