The costs of conventional, insurance-based group health plans have been steadily rising during the last 20 years. Premiums have more than tripled since then and workers are asked to take on larger and larger shares of the payments. Through it all, a general grumbling around healthcare solutions continues across dinner tables, in boardrooms, and on social media.

The good news for business owners looking to control quality and costs is that an alternative way to provide healthcare to employees already exists – self-funded health plans.

While 83% of larger companies already use fully or partially self-funded health insurance, 87% of smaller businesses haven’t yet figured out how to control heathcare costs by implementing a self-funded plan.

In fact, a lot of smaller companies are not even aware that self-funding is an option. And among those who have heard about it, it’s probable that their current knowledge is fraught with misperceptions.

These myths and misperceptions about self-funded health plans can keep you from exploring an innovative, flexible, and cost-effective way to put your own company – and not an insurance company – in the driver’s seat.

Myth #1 – Self-Funded Health Plans are Way Too Risky

Imagine self-insuring your car instead of paying an insurance company to do that. You’d be the one to pay the costs of any damage you do to the health and property of others. If that sounds too risky, you’d be right.

So, when the term “self-insured” or “self-funded” is applied to group health insurance, it’s natural to assume the same—until you learn a little more.

Companies that self-fund incorporate stop loss insurance into their plans. Stop loss insurance is a policy that kicks in case an employee’s catastrophic health event or other unforeseen expenses forces the company to pay out above a predetermined level, thus capping their risk.

Myth #2 – Only Really, Really Big Companies Have Self-Funded Health Plans

In the past, that was true. One reason why was – that due to limited demand, only large companies could generate the volume necessary to make stop loss insurance profitable to insurers.

However, with rising rates on traditional health insurance and the introduction of the Affordable Care Act, things quickly changed. Smart insurers and Third Party Administrators (TPAs) started creating tailor-made products for companies interested in self funding, regardless of company size.

Today, many small and mid-sized companies take advantage of these options and have effectively said goodbye to bouncing around from one insurance company to the other in search of lower rates.

Myth #3 – Self-Funded Health Plan Coverage isn’t as Good 

One-size-fits-all plans sometimes don’t offer good coverage at all. While self-funded and fully insured plans have all of the same constituent parts, the ability to put those parts together in the way that best suits your company is a quality-raising, cost-saving game-changer.

When a company self-funds, it not only saves money, but also has the opportunity to:


  1. Design a unique healthcare plan that meets its specific needs and the unique needs of its employees
  2. Say goodbye to state-mandated benefits and choose what health conditions to cover
  3. Get instant savings on taxes and decreased operational costs
  4. Make plan decisions based on actual claims data
  5. Add value to the healthcare dollars that are already being spent

Myth #4 – Self-Funded Health Plans Require Companies to Pay Claims as They Come In

What’s so great about self-funding is that you get to choose how you fund your group plan. And there are several options.

Every mid-sized company needs to take a hard look at one of those options in particular: level funding.

Instead of paying claims as they come in, you pay a set-in-stone rate (1/12 of your max annual cost) each month. That way you don’t have to worry about not knowing what you’ll have to pay in claims.

Yes, it’s just like a fully insured plan, but with more benefits. And any claims dollars your employees don’t spend are returned to you.

Myth #5 – Even with Level Funding, There’s No Way to Keep Claims Costs Down (and Get Money Back)

One way to reduce your healthcare costs with the added bonus of increasing employee satisfaction and productivity at the same time is to incorporate direct primary care (DPC) into the healthcare plan.

For a flat monthly fee, your employees have direct access to a primary care physician. No claims need to be sent to an insurance company, which means a reduction in work all around.

Direct primary care physicians can take care of 90 to 95% of a patient’s health issues. Your company can save 20 to 35% on healthcare claims – which can add up to hundreds of thousands of dollars – simply by reducing employee use of emergency rooms, hospitals, specialists, and other expensive services.

That’s because with DPC, your employees get 24-7 access to their primary care doctor via office visits, phone or video visits.

DPC also offers same-day visits, no copays, low-cost labs, unlimited routine family medicine procedures and a doctor who is motivated to keep costs down and quality high because their business depends on it — now that’s worth asking about.

Myth #6 – Self-Funded Health Plans are Confusing

The good news is most companies don’t have to; instead, they work with TPAs (Third Party Administrators). TPAs take all or as much of the responsibility for designing and administering a self-funded plan that a company wants them to.

Even after hiring a TPA, operational costs will likely be less than the operational costs paid to a big-box insurance company that gives no control over your claims costs.

Myth #7 – Self-Funded Health Plans Didn’t Work 10 Years Ago; They Won’t Work Now

A decade ago, forward-thinking, mid-sized companies took a chance on self-funding when insurance products were mainly meant for larger companies. Some of those mid-sized companies had a bad experience because the products simply weren’t right for them at the time.

Today, the self-funded market is far more mature. There are multiple products designed to help small to mid-sized companies safely take control of claims costs while providing employees with the quality care they deserve.

Whether you know little about self-funding or haven’t thought about it for a few years, it’s time to give this group health plan option a long, hard look.

It just may be the alternative you’ve been waiting for.

Want To Learn More About How You Can Benefit From Self-Funded Health Plans?

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