There are only two types of healthcare plans, one is self insured and one is self funded.
self insured the company pays for the healthcare costs of the employees at a reduced rate. Similar to government employees and teachers
the other is self funded where the employees pool monies together to pay a shared medical cost. The plan participates aka as the PLAN owns the costs associated with the payment of the medical costs.
They I will assure you will want a portion of the monies they paid out paid back to the PLAN.
When employers want to offer health insurance to their workers, they essentially have two options: a self-insured plan (also known as a self-funded plan) or a fully insured plan. There are important differences to understand between the two in terms of who pays the actual claims costs.
Self-insured health insurance means that the employer uses their own money to cover their employees' claims. Most self-insured employers contract with an insurance company or independent third party administrator (TPA) for plan administration, but the actual claims costs are covered by the employer's funds.
Fully-insured means that the employer purchases health insurance coverage from a commercial insurer and the insurance company then takes on the risk associated with the employees' health claims.
According to a 2024 Kaiser Family Foundation analysis, 63% of U.S. employees with employer-sponsored health insurance are in self-insured plans.
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Most businesses with 200 or more employees are self-insured, with 79% of covered workers at these businesses enrolled in self-insured health plans. Among businesses with fewer than 200 employees, however, just 20% of covered workers are in self-insured plans (this is up from 13% in 2018, but a little lower than it was in 2020).
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This makes sense, since larger businesses are generally the ones that have the financial ability to take on the risk associated with employees' medical claims. But for employers who are able to do so, self-insuring can provide financial savings as well as the option to tailor-make a health plan to suit the employer's and employees' needs.
Insurers and TPAs that contract with self-insured businesses are increasingly offering products that make it easier for smaller businesses to self-insure. These include stop-loss (also known as reinsurance) coverage that reimburses the employer in the event of a substantial claim, and level-funded coverage packages that eliminate the claims cost volatility that a self-insured plan could otherwise face.
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Fully-insured health insurance plans are mostly regulated at the state level, although there are various federal minimum standards (contained in laws such as
HIPAA,
COBRA, and
the ACA) that also apply.
Self-insured health insurance plans are not subject to state insurance laws and oversight. Instead, they're regulated at the federal level under ERISA (the
Employee Retirement Income Security Act) and various provisions in other federal laws like HIPAA and the ACA.
Each state has its own laws and regulations pertaining to health insurance, and state-regulated plans sold within the state are overseen by the
state insurance commissioner. But state-based laws and regulations only pertain to fully insured plans—they do not apply to self-insured plans.
So, for example, when a state imposes rules to
require health plans to cover vasectomies or infertility treatment, the requirements don't apply to self-insured plans. And nearly two-thirds of people who have employer-sponsored health insurance are covered under self-insured plans.
This can sometimes cause frustration and confusion, especially when a person is in a state where a new insurance mandate or law generates significant excitement and media coverage, and residents with self-insured plans may not be aware that the new rules don't apply to their coverage.
This can be the case, for example, if a state starts to require state-regulated plans to cover something like infertility treatment, but then people with self-insured plans don't get that benefit unless their employer decides to offer it.
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If you work for a large company, it's likely that your health coverage is self-insured. Your employer might have chosen to create a very robust benefits package to use as a recruitment and retention tool, and your coverage may well be more generous than it would be if the employer purchased coverage from a health insurance company.
But it's also important to understand that state-based health insurance mandates don't apply to self-insured plans. Depending on where you live, this might explain why your health plan isn't covering a service that your state requires health plans to cover.
There are some basic federal minimum standards that do apply to self-insured plans though. This includes things like the HIPAA rules that prohibit employer-sponsored plans from rejecting an eligible employee (or dependent) based on medical history, and the ACA rules that prohibit plans from imposing waiting periods for pre-existing conditions.
The Pregnancy Discrimination Act applies to all health plans with 15 or more employees, including self-insured plans. Along with various other nondiscrimination provisions, the law requires employer-sponsored health plans to include maternity coverage. (The law doesn't require a small employer to offer coverage, but if they do, it must include maternity benefits.)
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Self-insured plans are also subject to COBRA (assuming the group has 20 or more employees), which means eligible employees and their dependents can opt to continue their coverage if a life change event would otherwise result in a coverage termination.
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The Families First Coronavirus Response Act required nearly all health plans, including self-insured plans, to waive cost-sharing for COVID-19 testing during the COVID public health emergency, meaning that the enrollee didn't have to pay anything for the office visit or the test itself.
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But the COVID public health emergency ended on May 11, 2023.
8 So health plans are now allowed to charge cost-sharing for in-office COVID testing and no longer have to
cover the cost of at-home COVID tests.
As described above, state-based laws and regulations generally only apply to fully-insured plans. Self-insured plans are not subject to them, although there is sometimes an option for self-insured plans to opt into these requirements.
There are also some federal requirements that do not apply to self-insured plans. Some examples include the following:
- Medical loss ratio rules do not apply to self-insured plans.11
- Self-insured plans do not have to include coverage for the ACA's essential health benefits (with the exception of preventive care, which must be covered—with no cost-sharing—on all non-grandfathered plans). Any essential health benefits that they do cover cannot have annual or lifetime caps on the benefit amount. This is the same as the rules for large group health insurance plans, and most self-insured plans are also large group plans. Some employers that would otherwise have to purchase coverage in the small group market have chosen to self-insure, which means that they have the option to not include all of the essential health benefits in their coverage. In all but four states, "large group" means 51 or more employees; in California, Colorado, New York, and Vermont, it means 101 or more employees12 (Colorado will be switching to the definition used in most states starting in 2026.)13
- Three to one premium limits (capping premiums for older enrollees at no more than three times the premiums for younger enrollees) do not apply to self-insured plans. They also don't apply to large group plans, and again, most self-insured plans are offered by large employers. If a small employer opts to self-insure, they are not subject to the ACA's limits on how much premiums can vary based on age.
Most very large employers self-insure their workers' health coverage, so the plans are governed by federal—instead of state—regulations.
www.verywellhealth.com