Self‑funded health insurance (also known as self‑insured) means the employer pays for employee medical claims directly from its own funds rather than purchasing a fully insured plan. Employers typically partner with a third‑party administrator (TPA) to process claims and manage administrative duties.

A group medical captive is a risk-sharing model where similar employers pool premiums into a captive fund that covers claims beyond each employer’s specific deductible. Any unused premium is returned to members annually, and catastrophic claims are covered via stop‑loss reinsurance.

Group captive insurance is typically best for companies with 25 to 1,000 employees, seeking control over plan design, transparency into claims data, and potential savings of up to 20%. Suitable employers also value long‑term strategies and risk sharing rather than one-size-fits-all fully insured plans.

Common funding models include “Pay As You Go” where claims are paid as they occur, “Funding to Expected” based on projected claim costs, and “Funding to Max” which includes a built-in buffer plus stop‑loss coverage. Employers choose based on cash flow preferences and financial risk tolerance.

Stop‑loss insurance protects self‑funded employers by covering claims beyond a specified individual or aggregate deductible, safeguarding against catastrophic losses. These policies effectively limit financial risk in self‑insurance arrangements.

Many employers save 10–20% annually compared to fully insured premiums through reduced administration costs, better cash flow, and retention of unused risk funds. Those savings stem from paying only actual claims costs and capturing surplus through captive mechanisms.

Self‑funded health plans are regulated under ERISA and federal laws like HIPAA, COBRA, and the ACA, but are exempt from most state insurance mandates. This affords flexibility in plan design while still requiring compliance with federal standards.

Yes. Thanks to group captives and stop‑loss insurance options, businesses with as few as 25–50 employees can now self‑insure and share risk affordably—gaining benefits once limited to large employers.

A TPA administers daily operations of a self‑funded plan—handling claim processing, reporting, regulatory filings, and member services—while the employer retains financial responsibility for claims. Employers can select a TPA aligned with their data and service needs.

Many employers budget conservatively in Year 1 to build a surplus that cushions against unexpected high claims and volatility. That surplus also stabilizes future contribution rates and provides flexibility in plan design.

Funding to Expected means you set your budget based on projected claim costs using actuarial data, with stop-loss insurance protecting you from overages. Funding to Max builds in a higher contribution upfront to cover worst-case claim scenarios and offers maximum predictability—similar to the fully insured experience but with the savings potential of self-funding.