A fully-insured policy is one in which the benefits are purchased from an insurance company. In exchange for the premium it receives, the insurance company assumes the financial risk and responsibility of paying for covered services.
Conversely, a self-insured (also referred to as “self-funded”) plan is one in which an employer, not an insurance company, provides benefits. The employer established a plan document outlining the covered expenses, exclusions, and other important terms; pays claims using its own funds along with any enrollee contributions; and may hire a third party to administer benefits on its behalf. Oftentimes, an employer will utilize an insurance carrier as their third-party administrator.
Generally, federal law governs both fully-insured and self-insured plans; however, self-insured plans are not subject to state insurance regulation.
