Self-Funded Health Insurance Plan Law and Legal Definition

A self-funded health insurance plan is a job-based health insurance coverage plan that is funded by an employer from his/her own funds rather than through a health insurance company. It provides flexibility to both employers and employees as the health insurance company will handle administration and the cost of claims will be paid by the employer through a fund set up for this purpose. Thus, it allows the employee to set aside cash for qualified purposes such as uninsured health care costs. It also helps the employees obtain tax benefits. It is not a fully insured plan, where the employer contracts with an insurance company and the insurer covers the employees and dependents.