Definition

Could someone please accurately explain what a self funded plan is?

Let me see if I can explain it right.  Usually large corporations have self funded plans.  I'm in Georgia and work for the state (in the public schools) and the state of GA which insures approx 690,000 people is a self funded plan. It means that they take the money you pay for your insurance (and the money they kick in for your insurance) and put it in a big pool.  This pool is what is used to pay all medical expenses sent in by your docs, hospitals, labs, etc.  Usually, the company pays a big insurance company to "administer" the plan, but the big insurance company really has nothing to do with your insurance other than they process the claims. I hope if I haven't explained this accurately, someone will correct me.  But I think I'm pretty close. -Elli

My company is self-funded and I think your explanation is right on.

A regular plan has your company playing premiums. These are used to pay out claims. But if a lot of people get sick that year, the insurance company might pay out more than your company put in as premiums. OTOH, if hardly anyone got sick, they'd have paid more in premiums than the insurance company paid out. But with a self-funded plan, the company pays only as much as the insurance company pays out.

It works out to be cheaper for large companies because their average expenses tend to be predictable and the insurance companies don't have to charge high premiums to be sure they make a profit. They get their profit from their administration fee and it's a sure thing.

Thank You for the posts ladies....Explanation that you guys have given is very clear.

I would add, that in my case CIGNA administers my co's plan. So the hoops I have to jump thru are set forth by Cigna in their position paper.  I'm sure PFG agreed to this, but they can be very strict.