Determining whether an employer is self-insured or fully-insured
Self-insured employers, also known as "self-funded" employers:
- Have liability for all claims made by the employee and pay for each claim.
- Control what is covered and what is not.
- May transfer some liability through the purchase of stop-loss insurance.
- Claims are processed and paid by the employer, or a third party administrator (TPA) on behalf of the employer.
- Claims are processed and paid by an insurance company.
- Employer pays a fixed premium to transfer liability for all claims to an insurance company who then pays the claims.
- Insurance company must cover State-mandated benefits and offers "One-size-fits-all" plan or "Off the shelf" insurance policy.
- Stop-loss insurance is not necessary as all risk is already transferred to the insurance company to cover claims.