Should my company switch from fully insured to self-funded?

The answer depends on your claims history, employee count, and current vendor economics — which is exactly what the Cost Modeling Report quantifies. Self-funding is not appropriate for every employer, and Scott will tell you that directly in the initial strategy session if the data doesn't support it. For employers in the 50–2,500 employee range on fully insured or BUCA-administered plans, the analysis is almost always worth running.

What is the difference between level-funded and truly self-funded?

A level-funded plan administered by a carrier retains carrier control over claims adjudication, PBM selection, stop-loss, and audit rights. A truly self-funded plan with an independent TPA gives the employer full authority over every vendor relationship and full transparency into every cost layer. The monthly payment structure can look similar. The economics underneath are not.

Can a company with 200 employees self-fund its health insurance?

Yes — with appropriate stop-loss coverage and utilization management in place. Scott's documented results begin at 50 employees, and a 125-employee group produced $771,000 in annual savings at fourth-year renewal. The Cost Modeling Report uses your actual claims data to determine whether the economics work for your specific group before any plan changes are proposed.

Why do brokers say self-funding is too risky for smaller employers?

Because their compensation scales with fully insured premiums. A broker who earns income based on premium volume has a financial incentive to keep employers on fully insured arrangements — the "too risky" and "too small" objections protect that income structure. The actuarial case for self-funding at smaller group sizes is well-established when the plan is designed with proper stop-loss and independent TPA selection.

What is a self-funded plan consultant's role under ERISA?

A fiduciary self-funded plan consultant advises the employer as plan sponsor on vendor selection, stop-loss structuring, PBM contracting, claims oversight, and ERISA compliance obligations — operating under a legal standard that requires recommendations to serve the plan sponsor's interest, not the consultant's compensation structure. Scott holds no carrier contracts and earns no vendor-based compensation, making fiduciary alignment structural rather than voluntary.

The Fully Insured Illusion | Hettesheimer Insurance

Fully insured feels safe. The monthly premium is predictable, the carrier handles the claims, and the renewal conversation — while uncomfortable — at least produces a number you can budget around.

That comfort is the illusion.

A fully insured plan compounds at 8–18% annually regardless of your actual claims experience. You are funding other groups' risk pool alongside your own, with no audit rights, no claims visibility, and no governance authority over a single vendor relationship. The Fiduciary Risk Scoring Model™ rates legacy fully insured plans at 4.2 out of 5 on the governance risk scale — not because the coverage is inadequate, but because the employer pays without oversight, renews without data, and absorbs increases without recourse.

Predictable payments. No governance. Rising costs. Every year.

This distinction matters and most brokers obscure it deliberately.

A level-funded plan administered by Cigna, UnitedHealth, or BCBS scores a 4.6 out of 5 on the Fiduciary Risk Scoring Model™ — higher than a legacy fully insured plan — because it combines self-funding cost exposure with fully insured opacity. The carrier retains control over claims adjudication, PBM selection, stop-loss placement, and audit rights. The employer assumes more financial risk while receiving less transparency than they had before.

A truly self-funded plan with an independent TPA is a structurally different arrangement:

Claims adjudicated by an independent third-party administrator with no carrier affiliation
Stop-loss placed independently in the open market at employer-favorable attachment points
PBM contracted separately with full transparency into spread pricing and rebate economics
Full employer audit rights over all claims, vendors, and plan data
Fiduciary Risk Scoring Model™ governance score: 1.0

A level-funded plan administered by the carrier you are trying to reduce is not self-funding. It is a rebranded renewal.

The 1,000-employee threshold brokers cite as the minimum viable size for self-funding is not an actuarial standard. It is a revenue floor.

Traditional broker compensation scales with fully insured premiums. A 200-employee group paying $3.5 million in annual premiums generates more broker income on a fully insured arrangement than on a self-funded plan where the employer controls vendor selection and compensation is transparent. The "too small" objection protects that income — not your plan.

Scott's documented client base includes employers starting at 50 employees. A 125-employee group produced $771,000 in annual savings under the Advanced Benefit Design framework. With the right stop-loss structure and utilization management in place, actuarial viability for self-funding begins well below 250 employees. The Cost Modeling Report determines whether the economics work for your specific group — using your actual claims data, not an industry rule of thumb.

A self-funded employer health plan governed under ERISA operates under federal law — not state insurance mandates. For the employer, this means:

A single, uniform plan design applies consistently to all employees regardless of their state of residence
The plan is not subject to state-mandated coverage requirements or carrier approval processes
Plan design decisions remain with the employer and the fiduciary advisor, not with the state insurance commissioner
Multi-state employers can administer one plan across all locations without state-by-state variation in benefits or compliance obligations

This is a structural advantage that carrier-administered plans, by design, do not offer. It is also the reason Scott can serve employers nationally — the ERISA framework is federal, and it applies uniformly across the 37-plus states where Scott's practice operates.

Should my company switch from fully insured to self-funded?
The answer depends on your claims history, employee count, and current vendor economics — which is exactly what the Cost Modeling Report quantifies. Self-funding is not appropriate for every employer, and Scott will tell you that directly in the initial strategy session if the data doesn't support it. For employers in the 50–2,500 employee range on fully insured or BUCA-administered plans, the analysis is almost always worth running.
What is the difference between level-funded and truly self-funded?
A level-funded plan administered by a carrier retains carrier control over claims adjudication, PBM selection, stop-loss, and audit rights. A truly self-funded plan with an independent TPA gives the employer full authority over every vendor relationship and full transparency into every cost layer. The monthly payment structure can look similar. The economics underneath are not.
Can a company with 200 employees self-fund its health insurance?
Yes — with appropriate stop-loss coverage and utilization management in place. Scott's documented results begin at 50 employees, and a 125-employee group produced $771,000 in annual savings at fourth-year renewal. The Cost Modeling Report uses your actual claims data to determine whether the economics work for your specific group before any plan changes are proposed.
Why do brokers say self-funding is too risky for smaller employers?
Because their compensation scales with fully insured premiums. A broker who earns income based on premium volume has a financial incentive to keep employers on fully insured arrangements — the "too risky" and "too small" objections protect that income structure. The actuarial case for self-funding at smaller group sizes is well-established when the plan is designed with proper stop-loss and independent TPA selection.
What is a self-funded plan consultant's role under ERISA?
A fiduciary self-funded plan consultant advises the employer as plan sponsor on vendor selection, stop-loss structuring, PBM contracting, claims oversight, and ERISA compliance obligations — operating under a legal standard that requires recommendations to serve the plan sponsor's interest, not the consultant's compensation structure. Scott holds no carrier contracts and earns no vendor-based compensation, making fiduciary alignment structural rather than voluntary.

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