Choosing the right health plan funding isn’t just about cost – it’s about control. For business leaders, understanding the fundamental differences between Self-Funded and Fully Insured can unlock new ways to manage rising healthcare costs, gain greater transparency, and tailor benefits to employee needs. But which model really delivers the most savings?
Let’s break it down.
What Is a Fully Insured Health Plan?
Under a Fully Insured model, the employer pays a fixed monthly premium with the carrier assuming all the risk. The insurer covers the cost of claims, regardless of whether claims exceed or fall below the expected amount. If the plan performs well – meaning fewer claims are filed than expected – the carrier retains the savings.
Key Characteristics:
- Predictable monthly premiums
- Minimal plan design flexibility
- Limited claims visibility
- No reward in low-claim years
- Less administrative responsibility on employer
What Is a Self-Funded Health Plan?
With a Self-Funded (or partially Self-Funded) model, the employer pays for healthcare claims directly, often through a Third-Party Administrator (TPA), with a Stop-Loss policy in place to protect the company against catastrophic large claimant exposure. Unlike Fully Insured plans, any unused claim dollars stay with the employer.
Key Characteristics:
- Employer pays fixed admin costs and actual claims (up to specific Stop-Loss limit)
- Greater flexibility in plan design
- Full visibility into claims data
- Savings are retained by employer in low-claim years
- Ability to add targeted solutions like Specialty Rx cost mitigation programs
Cost Comparison: Which One Saves More?
| Plan Type |
Who Benefits? |
Claims Transparency | Plan Flexibility |
Upside Savings Potential |
| Fully Insured | Carrier | Low | Low | None |
| Self-Funded | Employer | High | High | High |
Over time, Self-Funding can lead to significant savings, particularly for businesses investing in proactive health programs. When structured well, Self-Funded plans allow employers to assume only the predictable portion of risk with protection against large claims through tailored Stop-Loss coverage.
Business Size Considerations
- Small Businesses (under 100 employees): Fully Insured plans may offer simplicity but come with limited control and transparency. However, Level-funded or partially Self-Funded options can provide a balance of predictability and savings potential.
- Mid-Size to Large Businesses: Self-Funded plans increasingly make financial sense. In fact, according to recent data on employer health benefits trends, a growing number of mid-size companies are shifting to self-funded models for cost control and flexibility. MSI’s clients in this category often benefit from unbundled solutions—choosing their own TPA, Pharmacy Benefits Manager, Network, and carved-out Stop Loss for maximum savings.
Why Clients Choose MSI Benefits Group
At MSI, we believe in taking back control of your health spend. Through data-driven analysis, plan customization, and continual carrier vetting, we guide our clients through both funding options – with a strong emphasis on performance accountability. We don’t just sell a plan. We build a strategy.
Whether Fully Insured or Self-Funded, we help clients make sense of the numbers, optimize cost containment, and tailor benefits to employee needs.
🔎 Breakout Box: Quick Comparison Highlights
Fully Insured
- Fixed monthly premiums
- No savings for low claims
- Less administrative responsibility
Self-Funded
- Greater customization and transparency
- Employer retains savings when claims fall below expected
- Opportunity to add targeted cost-control solutions (e.g., Specialty Rx programs)
Ready to Compare Options for Your Organization?
Let MSI Benefits Group evaluate your current plan performance. We’ll help you build a strategy for balancing risk, reducing spend, and taking back control of your healthcare spend – without compromising on care.
👉 Contact us today to learn more about our plan performance assessments.