TJ Bullock | February 18th, 2026
Let's get real for a second: your health insurance premiums probably went up this year. And last year. And the year before that.
But here's the thing: your health plan isn't necessarily broken. The way you're funding it might be.
Most employers focus on deductibles, copays, and which doctors are in-network. Those matter, sure. But the biggest impact on your bottom line? Whether you're fully insured or self-funded. It's the difference between paying a fixed price for something you might not use versus paying for what you actually consume.
Think of it like your cell phone plan. You can pay $100/month for unlimited data (even if you only use 2GB), or you can pay as you go based on what you actually need. Same concept, but with way more zeros.
With a fully insured plan, you pay an insurance carrier a set monthly premium for each employee. That's it. Simple. Predictable.
The carrier collects your premiums, pays all your employees' medical claims, handles the paperwork, and takes on 100% of the financial risk. If claims are low, the carrier pockets the difference. If claims skyrocket, that's their problem: not yours.
The upside? You know exactly what you're paying every month. Your CFO loves predictability. Your budget is locked in. Even if someone on your team needs a major surgery or has a high-cost health event, your bill doesn't change mid-year.
The downside? You're paying for that predictability. Insurance companies build profit margins, administrative costs, and risk buffers into your premium. If your team is healthy and claims are low, you don't get a refund. You're basically leaving money on the table: about 10-15% more than you'd pay with a self-funded approach.
Self-funded plans flip the script entirely. Instead of paying a fixed premium to an insurance company, you become the insurance company (sort of).
Here's how it works: Your business sets aside money to pay employee medical claims directly. You hire a third-party administrator (TPA) to handle the paperwork, process claims, and manage the day-to-day stuff. But the financial responsibility stays with you.
The upside? If your employees are healthy and claims are lower than expected, you keep the unused funds. You're not overpaying for coverage you don't use. Plus, you get way more flexibility to design benefits that actually fit your workforce: not some one-size-fits-all package. Self-funded employers typically save 15-20% compared to fully insured plans.
The downside? Financial risk. If claims are higher than anticipated, you're on the hook. That's where stop-loss insurance comes in (more on that in a second).
You might also hear the term ASO vs fully insured thrown around. ASO stands for Administrative Services Only: it's basically the administrative side of self-funding.
When you self-fund, you often hire an ASO provider to handle claims processing, customer service, network access, and compliance. They do the heavy lifting; you just pay them a flat fee. It's self-funding without needing an in-house benefits team.
So when people compare "ASO vs fully insured," they're really comparing self-funded (with administrative support) against traditional fully insured plans. Same fundamental difference: just with an admin partner helping you out.
Let's talk about the elephant in the room: "What if someone on my team gets really sick?"
That's a legit concern. The beauty of self-funding is you don't overpay in good years. The scary part is you could really pay in a bad year.
Enter stop-loss insurance: your financial safety net. It kicks in when claims exceed a certain threshold, either per person (specific stop-loss) or for your whole group (aggregate stop-loss).
Let's say you set your specific stop-loss at $100,000. If one employee has claims totaling $250,000, you pay the first $100,000, and stop-loss coverage picks up the remaining $150,000. This caps your risk while still letting you benefit from healthy years.
Most self-funded employers build stop-loss into their funding strategy. It's not fully insured, and it's not naked risk: it's a middle ground that works.
Traditionally, self-funding was only for big companies: think 500+ employees. The logic was simple: larger groups have more predictable claims.
But that's changed. Self-funding is now realistic for companies with as few as 50-100 employees, especially with the right stop-loss coverage and a solid TPA partner.
Here's a rough guide:
That said, every business is different. Your industry, employee demographics, and risk tolerance all matter. A construction company with older workers might approach this differently than a tech startup with 25-year-olds.
It's "Which is better for YOUR business?"
Fully insured plans make sense if:
Self-funded plans make sense if:
Neither is "wrong." It's about matching the funding strategy to your company's financial situation, risk appetite, and goals.
Let's put some numbers on it.
Say you're a 100-person company paying $700 per employee per month on a fully insured plan. That's $84,000/month, or just over $1 million annually.
With self-funding, you might pay 15-20% less: around $600/employee/month: if claims stay reasonable. That's $840,000 annually, saving your business $160,000+ per year. Add stop-loss insurance (typically 10-15% of expected claims), and you're still coming out ahead.
But here's the kicker: those savings compound. That $160,000 savings this year? It's there again next year. And the year after. Over five years, we're talking about $800,000+ staying in your business instead of padding an insurance company's profit margin.
That's hiring budget. That's expansion capital. That's real money.
Too many employers think rising health costs are inevitable. They renew their fully insured plan every year, brace for the 8-12% increase, and move on.
But the funding strategy is where the real leverage lives. It's not about cutting benefits or making healthcare worse for your team: it's about paying for what you actually use instead of what an insurance company thinks you might use.
Self-funded vs fully insured isn't just an insurance nerd debate. It's a business decision that directly impacts your profitability, cash flow, and long-term financial health.
If you've been fully insured for years and never questioned it, now's the time. Run the numbers. Look at your claims history. Talk to a benefits advisor who can model out what self-funding (with stop-loss) would look like for your specific situation.
At Bullock and Associates, we help employers with 10-500 employees figure out the funding strategy that actually makes sense: not just what's easiest or what they've always done. Because your health plan might be fine. But your funding strategy? That could be costing you six figures a year.
Want to explore whether self-funding could work for your business? Let's talk about your numbers, your risk tolerance, and what a smarter funding strategy could mean for your bottom line.
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