Often confused with self-insurance, a self-funded health care plan is funded entirely by the employer. A self-funded plan may be self-administered, or the employer may contract with an outside administrator for an administrative services only arrangement. Self-funded plans obtain stop-loss insurance to cover catastrophic illnesses.
An arrangement under which some or all of the risk associated with a benefit plan is not covered by an insurance contract. The plan sponsor is responsible for that portion of the risk that is not insured.
In a self-funding health benefit plan, the employer sponsors a plan typically funded by contributions from the employer and employees.