Information on Self-funded Health Insurance Plans
Part 2, Chapter 6: Self-funded Plans Page 1
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Self-funded Plans
A self-funded plan is a benefit plan established by a corporation, a union, an association, or a state or municipal government agency. Such plans play an important role in the American health insurance system. At present, the majority of large employers offer benefits through such plans.
Self-funded plans may differ significantly from each other. For example, some self-funded plans may offer a managed care approach within the self-funded plan framework; others may offer a more traditional approach. Some self-funded plans may be administered directly by the plan sponsor -- the corporation, union, association, or state or municipal government agency -- while others may be administered by a plan administrator such as an insurance company.
Self-funded plans also differ significantly from both traditional health insurance plans and managed care plans in a number of ways. First, traditional health insurance plans or managed care plans are generally designed by an insurer, and the insurer makes benefit-related decisions in terms of the plan rules. However, a self-funded plan is usually designed by the plan sponsor, a corporation, a union, an association, or a state or municipal government agency. If an insurance company serves as the plan administrator for a self-funded plan, the company generally acts only as the administrator, not as the insurer. In that capacity, the insurance company carries out the plan rules established by the sponsor.
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