Common Myths About Self-Funded Health Plans

Many employers dismiss self-funded health plans based on assumptions that aren’t entirely accurate. While self-funding isn’t right for every organization, misunderstanding how it works often prevents employers from even considering it as an option.

Myth 1: Self-Funded Plans Are Only for Large Employers

Reality: Mid-sized employers increasingly explore self-funded or level-funded arrangements due to improved data access, plan flexibility, and stop-loss protections.

Myth 2: Employers Take on Unlimited Financial Risk

Reality: Stop-loss insurance limits exposure and creates defined risk thresholds, helping employers manage costs more predictably.

Myth 3: Self-Funding Means Less Coverage for Employees

Reality: Coverage levels are determined by plan design, not funding method. Benefits can be equal to or stronger than fully insured plans.

Myth 4: Claims Volatility Makes Costs Unpredictable

Reality: Claims data transparency allows employers to identify trends and make proactive plan adjustments rather than react to carrier increases.

Myth 5: Self-Funded Plans Are Too Complex to Manage

Reality: With the right advisor and vendors in place, administrative responsibilities are often similar to fully insured plans.

A Clearer Understanding of Self-Funding

Self-funded plans are not a one-size-fits-all solution, but many of the reasons employers avoid them are based on outdated or incomplete information. Understanding the facts allows employers to make more informed decisions about their benefits strategy.