There are important differences to understand between the two in terms of who pays the actual claims costs.
What Is Self-Insured Health Insurance?
Self-insured health insurance means that the employer uses their own money to cover their employees' claims.
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Self-insured health insurance plans are not subject to state insurance laws and oversight.
But state-based laws and regulations only pertain to fully insured plansthey do not apply to self-insured plans.
If you work for a large company, it’s likely that your health coverage is self-insured.
But it’s also important to understand that state-based health insurance mandates don’t apply to self-insured plans.
The Pregnancy Discrimination Act applies to all health plans with 15 or more employees, including self-insured plans.
The federalNo Surprises Acttook effect in 2022, protecting consumers from most instances of “surprise"balance billing.
It applies to self-insured as well as fully insured plans.
There are also some federal requirements that do not apply to self-insured plans.
TPA services can be offered by insurance companies or independent companies.
(Those provisions had mostly expired by early 2021, around the time COVID vaccines became widely available.)
Summary
Self-insured health coverage is the most common approach used by large employers in the U.S.
But in most cases, they contract with a third partyoften a well-known health insurance companyto administer the coverage.
Employees are often unaware of whether their health plan is fully insured or self-insured.
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