Self-Funded vs. Fully Insured

A self-funded health plan is one in which the employer pays claims directly rather than purchasing insurance, made possible by ERISA's preemption and "deemer" clauses, which prevent states from classifying a self-funded plan as "insurance" and regulating it under state insurance law.

67% of all covered workers nationally are enrolled in self-funded plans, rising to 80% at larger firms (200 or more employees), per KFF's 2025 survey. Most self-funded employers pair the plan with stop-loss insurance to cap catastrophic risk—adoption runs above 90% among mid-size self-funded employers (200 to 4,999 workers), though it actually drops to roughly 53% at the largest, "jumbo" employers (5,000+ workers), who are often well-capitalized enough to self-insure more of that risk directly.

Self-funded employers carry more direct claims exposure than fully-insured employers, which is exactly why an avoided ED visit or an early-caught chronic condition shows up in their own claims experience almost immediately, rather than being absorbed into an insurer's broader risk pool. That direct link between utilization and cost is why self-funded employers are the priority buyer for on-site care like the OnMed CareStation^®. See: ERISA, Level-Funded Health Plan.