Self-Insurance: The Details

What are some of the differences between Insured and Self-Insured plans?


    Insured Health Plans

  1. Full risk is borne by the carrier in exchange for collecting all premium.
  2. Carrier determines plan design, filed with State in compliance with State benefit mandates.
  3. Carrier determines timing of premium payment, sets rates.
  4. Carrier pays claims, determines insurance rates, sets managed care network, chooses pharmacy card arrangement, etc. Carrier sets these fees.
  5. Full premium subject to State premium tax.
  6. Carrier holds reserves (some set this at 20-40% of annual premium).
  7. Carrier follows its plan protocols.

    Self-Insured Health Plans
  1. Specific and/or aggregate stop loss coverage covers catastrophic losses. Plan Sponsor keeps premiums, funds claims as they occur.
  2. Employer designs plan, subject to ERISA.
  3. Employer determines funding cycles, sets rates (in conjunction with stop loss, where applicable).
  4. Employer contracts TPA to pay claims, competitively shops stop loss insurance, chooses managed care network, pharmacy card, etc.
  5. Premium tax applies only to stop loss premium.
  6. Employer holds reserve funds.
  7. Employer establishes plan protocols with TPA.


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