In an employer self-funded health plan, who is responsible for managing and funding the plan?

In an employer self-funded health plan, the responsibility for managing and funding the plan lies with the employer. This model enables the employer to take on the financial risk associated with providing health benefits directly to their employees, rather than purchasing insurance coverage from an insurance company. Under this arrangement, the employer pays for healthcare claims out of pocket as they arise, which can lead to savings on premiums and greater control over the benefits offered.

The employer is involved in decision-making processes regarding the plan’s design, including the types of coverage provided, deductibles, and co-pays. By self-funding the health plan, the employer has the flexibility to tailor benefits to better suit the needs of their workforce, while also managing the financial aspects of the plan directly. This setup necessitates careful planning and consideration of the associated risks, but it can ultimately be beneficial for both employer and employees when managed effectively.

In some cases, the employer may choose to hire a third-party administrator to help with the management of the plan, but the financial liability and overall governance still rest with the employer. This distinguishes self-funded plans from fully insured plans, where the insurance company bears the responsibility for funding and managing the health benefits.