If you're running a business in Connecticut with 50 or more employees, there's a conversation you should have had by now. And if your broker hasn't brought it up, that tells you something.
The conversation is about how your health plan is funded — and whether the model you're using is actually the right one for your business. Most employers are on a fully insured plan because that's what they were put on years ago. Nobody ever questioned it. Nobody ever explained the alternatives. And every year, the renewal comes in with another double-digit increase, and everyone just accepts it.
That's not strategy. That's autopilot.
What Does "Fully Insured" Actually Mean?
Fully insured is the traditional model. You pay a fixed premium to the insurance carrier every month. In exchange, the carrier assumes all the risk. If your employees have a terrible claims year, the carrier absorbs the cost. If your employees barely use their insurance, the carrier keeps the difference.
Read that last part again: if your employees barely use their insurance, the carrier keeps the difference.
That's the trade-off most employers don't fully understand. You're paying for certainty — a predictable monthly bill — but you're also giving up any chance of benefiting when your group is healthy. The carrier wins either way. You only win if claims are catastrophic, because at least you're protected. But how often is that actually happening?
That is why we say that information is power, because without it you're blind, and with the right information you can have a predictable outcome that amounts in money back in your pocket, and the amount can be significant. We have seen clients get 20% of their overall premium back at year end.
What Does "Self-Funded" Actually Mean?
Self-funded (also called self-insured) means your company pays for employee health claims directly, rather than paying an insurance carrier to do it for you. Now this is where most employers turn and run, they think they are on the hook for every claim for the entire year, but there are protections in place that are not discussed. While you are not becoming the insurance company, the point is to reap all of the rewards that they are claiming on your behalf.
Before you panic — no, this doesn't mean you're on the hook for a $2 million cancer claim. Self-funded plans include stop-loss insurance, which caps your exposure. There's a limit per person (specific stop-loss) and a limit for the entire group (aggregate stop-loss). Beyond those limits, the stop-loss carrier picks up the tab.
So you get the upside of lower costs when claims are good, with a safety net that protects you when they're not.
The Real Differences — Side by Side
| Fully Insured | Self-Funded | |
|---|---|---|
| Who pays claims? | The carrier | You (with stop-loss protection) |
| Monthly cost | Fixed premium | Variable — based on actual claims |
| If claims are low | Carrier keeps the savings | You keep the savings |
| If claims are high | Carrier absorbs the cost | Stop-loss kicks in at your threshold |
| Claims transparency | Limited — carriers control the data | Full visibility into every dollar |
| State mandates | Must comply with CT mandates | Exempt from most state mandates (ERISA) |
| Plan design | Limited to carrier's off-the-shelf plans | Fully customizable |
| Cash flow | Premium due regardless of claims | Pay as claims come in |
| Best for | Small groups, risk-averse employers | 50+ employees, stable claims history |
Fully Insured
Self-Funded
The Hidden Advantages of Self-Funding That Nobody Talks About
Here's where it gets interesting — and what is never discussed with employers because it takes a lot of work to implement correctly.
1. You Get to See Your Own Data
On a fully insured plan, the carrier owns your claims data. You see nothing, if you ask how the claims are running they go silent. On a self-funded plan, you see everything — every claim, every dollar, every trend. That data is yours, and it's powerful. It lets you make informed decisions about plan design, wellness programs, and cost containment instead of guessing. You can add when something is needed, and remove it when it's not being used.
2. You're Exempt from Most State Insurance Mandates
Self-funded plans are regulated under federal ERISA law, not state insurance law. That means you're exempt from most Connecticut-specific mandates that drive up the cost of fully insured plans. This alone can be a meaningful cost difference, especially as states continue adding new mandates every year.
3. You Stop Subsidizing Other Employers
In a fully insured arrangement, your premium is partially based on the carrier's entire risk pool — not just your group. So if your employees are healthy but the overall pool isn't, you're paying more than you should. Self-funding ties your costs directly to your own group's experience. Good health actually benefits you financially.
4. Cash Flow Advantages
With fully insured, you pay the same premium every month no matter what. With self-funded, your costs fluctuate based on actual claims. In months with lower claims, you keep that money in your business instead of sending it to a carrier who has no obligation to give it back.
5. Incentives
We have seen carriers collect drug rebates in the six figure range on a drug you are paying for for your employees. If you want access to collecting those rebates, which you deserve, the only way to access them, is by going self-funded. We took a group self-funded and watched their $180,000 in Rx spend cut down $30,000 the following year — that's $150,000 back in the employer's pocket. If you have a good to excellent claim year, don't you think that money should go back in your pocket? Well the only way to claim 100% of those funds is to go self-funded. Level-funded is a way to gain 50% of those funds back to you, but why share half that amount with the carrier, why should they get it? We believe that money is 100% yours.
6. You Control the Plan Design
Aren't you always saying the plans are getting worse? Well when you go self-funded you control the entirety of how the plan is built. Want a plan that covers a specific service? Want to exclude something that doesn't make sense for your workforce? Want to design a plan around your employees' actual needs instead of choosing from a carrier's pre-built menu? Self-funding gives you that control. You're not locked into someone else's product — you're building your own.
What About Level-Funded? Where Does That Fit?
Level-funded is the middle ground — and it's worth mentioning because it comes up constantly. A level-funded plan gives you a fixed monthly payment (like fully insured) but it's structured more like a self-funded plan under the hood. There's a claims fund, a stop-loss component, and admin fees. If claims come in low, you can get money back.
It's better than fully insured for many employers. But it has limitations that are rarely discussed. The refund potential is often capped, the stop-loss terms can be restrictive, and the "level" monthly cost can still increase significantly at renewal based on your claims experience. It's a step in the right direction, but it's not the full picture.
We often use level-funded as a bridge — a way to get employers comfortable with the concept of claims-based funding before transitioning to a true self-funded arrangement when they're ready.
So Who Should Be Self-Funded?
Self-funding isn't for everyone. But it's for a lot more employers than most people think. Here's a general guide:
Self-funding is likely a fit if: You have 50+ employees, relatively stable claims history, the financial reserves to handle normal claims fluctuation, and a tolerance for some variability in monthly costs in exchange for significant potential savings.
Fully insured may be better if: You have fewer than 50 employees, and your claims are substantially higher than your predicted annual claims. Even if this is the case, you should be looking at level-funded where you receive some data, but not all. There aren't many situations where we would recommend a client sit in a fully-insured pool unless they are forced to based on size and claims.
But here's the thing — you shouldn't be making this decision based on a blog article. You should be making it based on a detailed analysis of your specific group's claims data, financial position, and risk profile. That's exactly what we do.
Why Haven't You Heard About Any of This Yet?
Honestly? Because it's harder. Setting up a self-funded plan takes real work — actuarial analysis, stop-loss marketing, plan document drafting, TPA selection, compliance review. It's a completely different level of effort compared to simply renewing a fully insured plan. Our last self-funded plan installation took roughly 3 months to prepare for, and another 2 months to finalize post-implementation.
Self-funding requires a specific knowledge base, and implementing these products incorrectly can have serious consequences. If your contract is set up incorrectly, you can miss paying for claims on the front or back end of your policy, and employers can be on the hook for those claims. It's much easier, and safer to hand you a renewal and talk again next year.
We don't operate that way. Our founders were trained as underwriters and actuaries — the people who build and price insurance plans from the ground up. We understand the mechanics of self-funding in a way that most simply aren't willing to. And we're willing to put in the 100-200 hours it takes to get it right because that's what doing this job well looks like.
The Bottom Line
If you have 50 or more employees and your broker has never had a serious conversation with you about self-funding, you need to ask yourself "why?".