Self-Funded vs. Fully-Insured Health Plans: How to Choose the Best Option for Your Business

As a business owner, you’re likely weighing the pros and cons of various health plan structures. Should you go with the predictability of a fully insured plan, or take on the financial risk of a self-funded plan in hopes of reaping long-term savings? The decision isn’t always straightforward, but understanding the key differences between these options is the first step in making an informed choice.

In this guide, we’ll explore the ins and outs of fully insured and self-funded health plans, helping you navigate the complexities and determine which option best fits your business. 

Fully-Insured vs. Self-Funded: What’s the Difference?

Fully-Insured Health Plans

A fully insured health plan is the traditional choice for many businesses. Here, you pay a fixed premium to an insurance company, which takes on the responsibility of covering your employees' medical claims. The insurance company handles everything, including processing claims and ensuring compliance, so you don’t have to.

The benefits? Predictability and ease. You know exactly what your premiums will be each year, making it easier to budget. Plus, the administrative load is off your plate, leaving you more time to focus on growing your business.

However, fully insured plans can come at a higher cost, especially if your employees are generally healthy. You may end up paying more in premiums than the actual cost of care, and there’s limited flexibility to tailor the plan to your team’s specific needs.

Self-Funded Health Plans

If you’re looking for more control, a self-funded plan might be worth considering. With this option, your business acts as the insurer, with Third Party Administrators (TPA) administering the plans (pay claims, issue ID cards, produce required plan documents, etc.). This can lead to significant savings, particularly if your employees are healthy. You also gain more flexibility to design a plan that meets the unique needs of your workforce.

But, self-funding isn’t without its challenges. The financial risk is greater, especially with the potential for high-cost claims. To manage this, Valentine can help you set up stop-loss insurance, which protects you if claims exceed a certain amount. It’s a safeguard that ensures a single large claim doesn’t disrupt your financial stability.

If you are leaning towards a self-funded plan, we can help you design a plan that fits your unique needs and mitigate the associated risks. Our team will work closely with you to customize your plan, ensuring that you have the right balance of coverage and cost control. 

What About Smaller Businesses?

You might assume self-funding is only for large companies, but that’s not the case. Even businesses with as few as 25 employees can benefit from self-funded plans. If you’re concerned about financial risk, consider a level-funded plan. This option combines some of the benefits of self-funding with the predictability of a fixed monthly payment. Plus, if your claims are lower than expected, you could receive a refund at the end of the year—an added bonus that helps balance cost savings with financial predictability.

Choosing the Right Plan for Your Business

Deciding between a fully insured and a self-funded health plan depends on several factors, including your company’s size, financial stability, and the level of involvement you want in managing the plan. Fully-insured plans offer peace of mind and simplicity but can be more expensive. Self-funded plans provide savings and flexibility but require a more active role in management.

For those seeking a middle ground, Health Reimbursement Arrangements (HRAs) offer a compelling alternative. HRAs allow you to reimburse employees for qualifying medical expenses, giving you flexibility and cost control without the complexities of traditional plans.

How Valentine Insurance Services Can Help

Navigating the complexities of health insurance options is no small task, but you don’t have to go it alone. At Valentine Insurance Services, we manage over $35 million in premiums and self-funded claims for over 18,000 clients nationwide, offering you the expertise and experience needed to make the right choice.

What sets us apart? Unlike traditional brokers who earn a commission based on your premiums—often leading to a conflict of interest when premiums rise—we offer a fee structure that ensures our financial incentives are aligned with yours. This approach allows us to focus entirely on finding the best plan for your business, not on maximizing our commission.

Additionally, our fully in-house member support team is on call to assist with onboarding your team, answering every claim-related question, and providing guidance on health plan details.

Whether you’re considering a fully insured plan, exploring the savings potential of self-funding, or looking into HRAs as a flexible alternative, we’ll work with you to design a plan that aligns with your business goals.

Ready to explore your options? Contact Valentine Insurance Services today, and let us help you provide the best possible coverage while managing costs effectively.