Why More Employers Are Taking a Fresh Look at Self-Funded Health Plans
At J Gard Benefit Consultants, we’ve seen a growing number of employers—especially those with smaller workforces—express interest in self-funded health plans. Rising healthcare costs are
pushing employers to think outside the box and explore options they may have previously considered out of reach.
Self-funding is no longer just for companies with hundreds of employees. Even groups with as few as 5-10 covered employees can explore self-funded or level-funded models to gain more visibility into their healthcare spending—and potentially take greater control of their budget.
What is Self-Funding?
Self-funding means that instead of paying premiums to an insurance carrier to manage and pay claims, the employer pays those claims directly as they are incurred. Most employers that self-fund use a Third-Party Administrator (TPA) to handle claims processing, and they set up a dedicated bank account to fund those payments.
This model offers greater transparency. Employers get to see where every healthcare dollar is going—and potentially take control over how those dollars are spent. If your workforce is relatively healthy, you can reap the rewards of lower costs.
What About the Risk?
Of course, self-funding comes with exposure to large, unexpected claims. That’s why stop-loss insurance is essential. At J Gard, we always recommend two types:
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Specific Stop-Loss: Protects the employer from large claims by individual plan members. For example, after the employer pays the first $50,000 in claims for one employee, the insurer covers any additional costs.
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Aggregate Stop-Loss: Caps the total amount the employer might pay for claims across the whole group in a given year.
Together, these protections help small and mid-sized employers participate in self-funding without putting the business at unnecessary financial risk.
What is Level Funding?
One self-funding approach that’s growing in popularity with smaller groups is level funding. This structure combines the benefits of self-funding with the predictability of a fully insured plan.
With level funding, the insurance carrier packages the administrative services, stop-loss protection, and an expected amount for claims into one monthly payment—similar to a traditional premium. The twist? If claims are lower than expected, the employer may receive a portion of the surplus back at the end of the year.
It’s a great solution for smaller employers who want a cost-effective alternative but also need predictability and protection.
A Quick Comparison:
| Fully Insured | Self-Funded / Level Funded |
|---|---|
| Fixed monthly premium | Flexible or level monthly funding |
| Carrier assumes all claims risk | Employer assumes claims risk, with stop-loss |
| No claims data access | Full claims transparency |
| No potential refunds | Potential surplus refunds |
| Simpler compliance | More compliance responsibilities (e.g., 5500 filings) |
Is Self-Funding Right for Your Business?
Self-funding isn’t a one-size-fits-all solution. Some employers may prefer the stability and simplicity of a fully insured plan, especially if cash flow is tight or internal resources are limited.
However, for employers looking to take greater control over healthcare costs, self-funding offers real potential for savings and customization. With the right support and protection in place, it can be a powerful strategy—even for smaller groups.
At J Gard Benefit Consultants, we work with employers to evaluate the full range of funding strategies and find the right fit for their goals, workforce, and budget. Whether you’re ready to make a change or just starting to explore, we’re here to help you understand all your options and help keep you compliant and informed.
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