What is the Origin of Self-Insured Plans?

This model emerged as a cost-control strategy for large organizations seeking to bypass state-level insurance regulations and avoid the profit margins and premium taxes charged by commercial insurers. It is a financial and administrative concept rooted in risk management, where the employer retains the underwriting risk. The Employee Retirement Income Security Act (ERISA) of 1974 is a key piece of legislation governing these plans.

What is the Mechanism of Self-Insured Plans?

The operational mechanism involves the employer setting aside funds to cover anticipated healthcare costs, often supplemented by purchasing "stop-loss" insurance to protect against catastrophic, high-cost claims. Because the employer funds the claims directly, they have the flexibility to design specific coverage criteria, which can be advantageous for innovative or personalized treatments, such as certain hormone replacement protocols, that might be restricted under standard commercial insurance formularies.

Self-Insured Plans

Meaning

Self-insured plans, in the context of corporate health benefits, are arrangements where an employer assumes the direct financial risk for providing healthcare benefits to its employees, rather than purchasing a fully-insured policy from an insurance carrier. The employer pays for claims out of its own assets as they are incurred, often hiring a third-party administrator (TPA) to manage the administrative functions like claims processing. This structure gives the employer greater control over plan design, including coverage for specialized hormonal therapies and wellness programs.