In today’s evolving healthcare landscape, more employers are turning to self-funded health plans to gain greater control over their benefits offerings. Initially favored by large employers, self-funding is rapidly gaining traction among midsized and even smaller businesses. This shift is driven by the need for cost savings, greater transparency, and direct access to claims data, empowering employers to make data-driven decisions for their most valued asset – their employees’ health and wellbeing.
A self-funded, or self-insured, health plan is where the employer takes on the financial risk for participant claims rather than paying fixed premiums to a traditional insurance carrier. This model offers employers the flexibility to design benefits that meet the specific needs of their employees while also implementing cost-containment strategies that help manage healthcare expenses more effectively.
From a regulatory perspective, self-funded plans are primarily governed by the Employee Retirement Income Security Act (ERISA), which generally preempts state insurance laws and sets a unified federal threshold. This distinguishes self-funded plans from fully insured products, which are regulated by state insurance departments and subject to a range of state-specific mandates.
One critical component of self-funded health plans is stop-loss insurance, which helps employers mitigate their financial risk by capping exposure to high-cost claims. Stop-loss coverage ensures that the reinsurance kicks in once claims exceed a predetermined threshold, protecting the employer from catastrophic financial losses. This allows businesses to benefit from the cost savings of self-funding while limiting the overall risk.
Another advantage of self-funding is that any savings achieved through careful management of healthcare costs remain with the employer rather than being absorbed into an insurance carrier’s profit margin. Employers can use these savings to fund future claims or even distribute them as refunds, providing financial control not available with fully insured plans. In contrast, carrier-owned TPAs are often focused on increasing their profitability, which may not align with employers’ or employees’ best interests.
Access to claims data is a key factor attracting employers to self-funded plans. Unlike fully insured plans, where carriers often control and limit access to data, self-funded employers should be able to access detailed insights into their healthcare spending. This allows them to identify the underlying drivers of their costs — whether chronic conditions, high-cost claims, or inefficient providers — and take proactive steps to address these issues.
For employers, particularly those in the mid-sized and smaller markets, the ability to analyze and act on their own claims data is transformative. It enables them to implement targeted wellness programs, refine their benefit offerings, and negotiate directly with providers to secure better rates and improved outcomes for their workforce.
As more employers embrace self-funding, the role of Third-Party Administrators (TPAs) has become essential. Independent TPAs, those that are not vertically integrated with a carrier, PBM, or reinsurer, in particular, are well-positioned to help employers navigate the complexities of self-funded plans, offering flexibility, transparency, and a level of customization that is difficult to achieve with carrier-owned TPAs.
Independent TPAs allow employers to customize their health plans, from plan design to network selection, ensuring that each plan is tailored to the unique needs of their workforce. This flexibility enables employers to implement cost-saving measures such as narrow networks or direct provider contracting, which independent TPAs are often better equipped to manage than their larger, carrier-owned counterparts.
Unlike TPAs owned by large carriers (e.g., BUCA), independent TPAs are seen as more neutral and transparent. Carrier-owned TPAs may prioritize their own financial arrangements over what’s best for the employer, especially when negotiating provider contracts. Independent TPAs, however, focus solely on serving the employer’s interests, offering greater transparency and neutrality in cost negotiations and plan management.
Independent TPAs are in charge of adopting cutting-edge technology and advanced analytics. These platforms give employers real-time insights into their healthcare spend, enabling smarter decision-making and more effective cost control. Unlike carrier-owned TPAs, which often rely on outdated systems, independent TPAs offer employers a more responsive and data-driven approach.
Many employers are interested in direct contracting with healthcare providers or creating narrow networks to control costs and ensure quality care. Independent TPAs excel in establishing these relationships, providing employers with the ability to bypass traditional carrier networks in favor of tailored, cost-effective care options that deliver better outcomes for employees.
Healthee provides TPAs with the technology and support they need to thrive in the self-funded space. With a platform that integrates enrollment decision support, care navigation, price transparency, and medical and mental Telehealth services into one seamless experience, Healthee simplifies healthcare for employees while offering critical data insights to employers and TPAs.
Healthee’s AI-powered decision support tools help employees choose the right health plans based on their individual and family healthcare needs. By analyzing their current usage and anticipated events in the upcoming year, Healthee ensures that employees are mapped to the most suitable health plans, reducing unnecessary costs and optimizing coverage.
Additionally, Healthee’s platform brings transparency to the healthcare experience, educating employees on the significant differences in cost for medical procedures — even within the same zip code — while maintaining equivalent or better quality. This level of clarity allows employees to make informed decisions about their healthcare, fostering a more engaged and cost-conscious consumer base.
The ease of implementing Healthee’s platform also stands out, offering an Amazon®-like user experience combined with the intelligence of Siri® or Alexa®, but tailored specifically to healthcare. This intuitive, all-in-one platform provides TPAs with the tools they need to deliver a superior, personalized healthcare experience, reducing administrative burdens while enhancing employee satisfaction.
As employers continue to shift towards self-funded health plans, independent TPAs have a unique opportunity to distinguish themselves by offering the customization, transparency, and cutting-edge technology that employers need and employees deserve. With Healthee, TPAs can provide a fully integrated solution combining enrollment support, care navigation, and real-time data analytics to create a seamless, user-friendly experience that empowers employers and employees.
Note: This blog is part of our ongoing series on Third-Party Administrators (TPAs). Be sure to check out the first article in the series to learn how TPAs can use personalization to stay ahead in the industry. And stay tuned for our upcoming third blog, where we delve deeper into the future trends shaping the TPA industry.
Disclaimer: The views expressed in this blog are based on Tracy Berwick’s personal experience and knowledge in the TPA space. This content should not be construed as legal or compliance advice, and readers are encouraged to consult with a qualified healthcare legal professional for specific guidance.
[1] Stephen Miller, CEBS. “Consider self-funding options when renegotiating health benefits,” SHRM, 2021.
Tracy Berwick is an accomplished executive and leader, bringing over three decades of experience in the healthcare industry. She is a proud Texan who cherishes her family, travel, and interior design. In previous roles as the COO, CEO, and Co-founder of various healthcare organizations, she has helped TPAs, carriers, captives, and healthcare-sharing ministries deliver benefits excellence. Tracy joins Healthee as the Senior Director of TPA Partnerships where she'll foster meaningful collaborations across organizations.
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