Thinking about self-funding?

Here’s what you need to know first

For employers with more than 25 employees on their health plan, self-funding can offer a valuable alternative to traditional fully-insured health plans—one that allows for greater flexibility and control of their healthcare plan. But self-funding isn’t just a simple switch—it’s a strategic decision that brings new responsibilities and new opportunities. 

If you're considering self-funding, here are three critical areas to understand first: stop-loss insurance, risk management and claims administration. 

1. Stop-loss insurance: Your financial safety net

One of the biggest misconceptions about self-funding is that your business becomes financially responsible for every medical expense—no matter how large. In reality, self-funded plans are designed with protection in mind.

Stop-loss insurance protects your company from high-cost claims and unexpected spikes in utilization. It acts as a backstop, ensuring that your plan has a safety net in place. There are two main types:

• Individual stop-loss protects your plan from catastrophic claims by a single employee. For example, if someone requires surgery or is diagnosed with a serious illness, this coverage kicks in once their claims exceed a set amount—say, $50,000. Your business pays up to that threshold, and the stop-loss insurer covers the rest.
• Aggregate stop-loss covers your entire group. It sets a cap on the total claims your business will pay in a year. If claims exceed a predetermined amount, such as 125% of expected annual costs, the stop-loss policy covers the excess. This helps keep your total exposure in check if claims across your population are higher than anticipated.

Together, these protections give your self-funded plan a strong layer of financial protection, helping you manage risk while still gaining the cost and flexibility advantages of self-funding. 

Tip: Many employers opt for both types of stop-loss coverage to ensure comprehensive protection against both individual high-cost claims and unexpected overall claims surges.

2. Risk management: More predictable than you think

Self-funding shifts more of the financial risk to the employer, but that doesn’t mean you’re flying blind. In fact, it often results in more visibility and control over your healthcare spend.

The key is understanding your group’s risk profile before you make the move. Generally, good candidates for self-funding include businesses that have:

• A relatively healthy workforce
• Predictable and consistent claims history
• Low employee turnover
• Leadership open to managing benefits more proactively

At Blue Cross and Blue Shield of Kansas (BCBSKS), we’re here to help you choose if self-funding is the right choice for your company. We offer data-driven analysis of your historical claims, demographics, and utilization trends to help you make an informed, confident decision.

Self-funding works best when you understand your risk and partner with an insurer like Blue Cross and Blue Shield of Kansas, who knows how to manage it.

3. Claims administration: A partner you can count on

A self-funded health plan gives you more control—but it also comes with more responsibility behind the scenes. From claims processing to compliance and employee support, your administrative partner plays a vital role in keeping things running smoothly.

With Blue Cross, you’re not working with a typical third-party administrator (TPA). You gain a trusted partner with the experience, resources and integrated services to help your plan run smoothly from day one. We provide:

• Accurate, timely claims processing and adjudication
• Robust compliance oversight and regulatory reporting
• Access to established provider networks and care management programs
• Dedicated member support for your HR team

Unlike traditional TPAs, which often outsource services or use separate vendors, BCBSKS delivers a seamless, end-to-end experience. That means greater efficiency for your health plan and a more consistent experience for your employees.

BCBSKS vs. Traditional TPAs

* Stop loss contracts from BCBSKS typically use an “incurred” basis—meaning claims are covered if the service happened during the policy period, even if billed later. Many TPAs use a “paid” basis, which may limit coverage if bills are delayed. While a paid contract might result in first-year savings, those costs often catch up in year two.

BCBSKS offers fewer headaches, better data and a more seamless experience for both you and your employees.

Self-funding ≠ DIY

It’s a common fear: “If I self-fund, am I on my own?”

The answer is absolutely not. BCBSKS will support you every step of the way, from evaluating your readiness to onboarding your team and managing your claims. Our dedicated account managers, data analysts and compliance experts work behind the scenes so you can focus on running your business—not running a health plan.

Ready to explore self-funding?

Self-funding offers flexibility, transparency and long-term savings potential—but only if it’s the right fit for your business. Connect with your BCBSKS representative today to get a side-by-side comparison and see if self-funding is a smart move for your business.