Self-funding is a decision made once and negotiated every year after.
Level-funded, self-funded and captive arrangements each move risk in a different direction, and each one transfers obligations along with it. The decision is worth making on your own numbers. What happens in the four renewals after it is where the money is actually won or lost, and that part is rarely discussed at the point of sale.
Three ways to hold risk, priced side by side.
We run all three against your actual claims history rather than an industry ratio, and we say plainly when the answer is to stay fully insured.
Level Funded
Expected claims funded in even monthly installments with stop-loss above them. Surplus can be returned in a good year; a bad year is capped. It is self funding up to the attachment point, which is the part that surprises people.
The consequences follow the substance: the PCORI fee is owed by you, and Section 105(h) nondiscrimination testing applies to the plan.
Self Funded
You pay actual claims from general assets and buy protection above a chosen layer. Cash flow becomes something to manage rather than something the premium smooths for you, and the plan’s fixed costs become visible and negotiable for the first time.
Group Captive
For groups where it fits, a captive pools risk with other employers and can return underwriting profit. It also carries collateral requirements, multi-year commitments and exit terms that deserve reading before the modeling is admired.
The rate is not the contract. The basis is the contract.
Stop-loss is where a self-funded plan either holds or quietly hands the risk back. Four terms decide which.
Contract Basis
Whether claims are covered by when they were incurred or when they were paid — and what happens in the first and last year of a contract — determines whether a gap exists at all. A cheaper rate on a narrower basis is not a saving.
Lasering and Exclusions
A known high-cost claimant can be carved out or given a separate higher attachment point. Sometimes that is a reasonable trade. It should always be a decision you made knowingly.
Aggregating Specific Deductibles
An extra layer between the specific and aggregate deductibles can lower premium meaningfully for groups with predictable frequency. It also adds a corridor you fund yourself.
The transition is the easy part.
Annual Stop-Loss Negotiation
Attachment points, lasering language and terms that shift risk back to you, reviewed every year rather than renewed by default.
Claims and Outlier Reporting
Claims, pharmacy and stop-loss data in one report with the high-cost outliers flagged early — the difference between planning around a large claimant and absorbing one.
The Obligations That Came with It
Filings, testing and documents that a fully insured employer never had to think about, carried on a calendar instead of remembered in July.
What employers ask about self-funding.
Are we big enough to self-fund?
Size matters less than stability. A group with predictable claims and adequate reserves can self-fund earlier than most expect; a volatile group of the same size may not want the year-to-year swing regardless.
What does stop-loss actually cover?
Two things, and the contract basis decides how much. The specific layer covers an individual above a threshold, the aggregate covers the plan as a whole — and whether the contract pays on incurred or paid dates decides what happens in a transition year.
Is the decision reversible?
Yes, but not painlessly. Returning to fully insured means new underwriting and a carrier that now knows your experience, so self-funding should be decided with a view of more than one year.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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