Self-Funding

Self-funding is a method where an organization sets aside its own financial resources to pay for its health insurance benefits instead of purchasing coverage from an insurance company. Essentially, the organization assumes the financial risk for employees’ health expenses, paying claims directly as they occur. This approach allows greater flexibility in plan design and potential cost savings, but it also requires the organization to manage or oversee the claims process and maintain adequate reserves. Self-funding is typically used by larger organizations with the capacity to handle variable healthcare costs and the resources to manage administrative tasks.