What if claims are higher than expected?
We use stop-loss insurance and reserve funds to cap and manage risk.
SELF-FUNDING 101
Why the Traditional Insurance Model Isn’t Working for Most Employers
Take back control of your healthcare costs with a smarter, more flexible benefits strategy.
SECTION 1:
The Problem
Health insurance is one of the biggest costs for most businesses, and one of the most frustrating. Every year, it’s the same routine: A renewal shows up with a big rate increase. You cut back benefits or shift more cost to employees. You pay more… even if your team used less care.
That’s because most employers are locked into a fully insured model. You send a large check to the insurance carrier every month regardless of whether your employees use healthcare services or not, you get no credit for a healthy population, and the carrier keeps any money you didn’t use.
It’s like buying an expensive buffet for your team and the restaurant keeps the leftovers. If you're frustrated by rising costs and lack of control, it's not your fault. The system is built that way.
What does this means for your business? It means you have:
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No visibility into what’s driving your costs
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No flexibility to design a plan around your people
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No real control over your renewal That’s not sustainable, and for many growing companies, it’s no longer acceptable.
SECTION 2
What Self-Funding Actually Is (Without the Jargon)
Most employers are familiar with fully insured health plans. You send a fixed premium to the insurance company every month, and they handle the rest: claims, payments, paperwork, and risk.
In the fully insured scenario, you're paying for predictability, not performance. The carrier sets your rates, keeps any unused money, and gives you little control over the plan itself.
Self-funding flips that model. With a self-funded plan, you’re creating your own health plan. You set aside money to pay for employee claims as they happen. Instead of sending premiums to a carrier, you only pay for the care your team uses.
However, it’s important to understand that you're not on your own to create and manage a self-funded plan, far from it.
Self-funding gives you more control and transparency, but you’re not building it from scratch. You’re partnering with specialists to design the right plan, monitor claims, and keep everything compliant.
Key players in a self-funded plan:
Third-Party Administrator (TPA):
Think of the TPA as your plan’s operations team. They process claims, pay providers, manage compliance, and
send you reports, so you’re not buried in
admin work.
Stop-loss insurance:
This is your financial safety net. It protects your business from:
- A single large claim (specific stoploss)
- A year with unusually high total claims (aggregate stop-loss)
Advisor:
Your strategic planner and project manager to minimize risk.
- Vendor selection and management
- Compliance and advocacy
- Communications and education
- Ongoing support and reporting
Benefits of self-funding
You stop overpaying for insurance you don’t use
You gain visibility into what’s driving your healthcare costs
You keep the savings when your people stay healthy
You get flexibility to design benefits that fit your culture and goals
SECTION 3:
Why Employers Choose Self-Funding
Health insurance is one of the biggest costs for most businesses, and one of the most frustrating. Every year, it’s the same routine: A renewal shows up with a big rate increase. You cut back benefits or shift more cost to employees. You pay more… even if your team used less care.
That’s because most employers are locked into a fully insured model. You send a large check to the insurance carrier every month regardless of whether your employees use healthcare services or not, you get no credit for a healthy population, and the carrier keeps any money you didn’t use.
01 Cost Savings
Avoid state premium taxes and carrier profit margins
Keep unspent claim dollars
Stop paying for coverage you don’t use
02 Transparency
Get real-time data on claims and cost drivers
Spot high-cost trends early
Negotiate better deals with providers
03 Flexibility
Customize your plan based on employee needs
Offer creative incentives and wellness benefits
Adapt your strategy as your workforce evolves
04 Risk management
Use stop-loss insurance to protect against high claims
Build a reserve fund to smooth cash flow
Work with experts to monitor and manage risk
SECTION 4:
What About the Risks? An FAQ
Self-funding isn’t right for everyone. But when done right, it can be a game-changer.
Isn’t this too complicated?
You’re not doing it alone. Your benefits advisor and TPA manage operations, strategy, and compliance.
I’m not ready to overhaul everything.
That’s okay. There’s a right time and a wrong time to self-fund. This is a 4 to 5-year journey, not a quick fix.
Will employees push back?
If done poorly, yes. If done right, with innovative design and clear communication, your company could offer better benefits that employees appreciate more.
SECTION 5
Is Self-Funding Right for You?
Self-funding isn’t a solution only reserved for the largest organizations; it is a strong solution for mid-sized companies, as well. Regardless of size, self-funding is about being intentional with your program.
You might be ready if:
You have 50+ employees or solid claims data
You have strong cash flow and reserves
You’re ready for a 4 to 5-year commitment
You want more control over your benefits strategy
You might want to wait if:
Your business is financially unstable
Your claims data is unclear or unpredictable
You’re looking for a short-term fix
You don’t have leadership or HR buy-in
SGL Partners take: We will never push self-funding if it’s not right for you or the right time. If it is right, we’ll show you how. If it’s not, we’ll tell you that, too. We’ll walk you through the numbers, ask the tough questions, and help you make a decision with clarity, never pressure. Employee benefits are a personal decision based on your company's values. We’re here to help you explore the options and find the right decision.
Building success, together
SGL believes that benefits are strategic tools for employee engagement and long-term achievement. Challenges and changes in the program can be opportunities for growth, retention, and culture building.
“Business as usual” is no longer sufficient. Rising healthcare costs, compliance requirements, talent retention, and supporting a geographically diverse workforce are all important for today’s companies.
That’s where we come in. We want to see you succeed, and we prove it by investing in our relationship and expanding trust through daily actions. Our talented team has your back and is here to build a lasting relationship based on mutual respect and shared success.