What is the difference between a self-funded and a fully insured employer health plan?

In a fully insured arrangement, the employer pays a fixed monthly premium to an insurer who bears all claim risk. In a self-funded (or self-insured) plan, the employer collects premiums from employees and pays claims directly, often contracting with a third-party administrator for administrative functions. Self-funded plans are regulated under ERISA, not state insurance law, giving employers more flexibility in plan design. Most large employers self-fund because it reduces costs when claim experience is favorable, but they typically purchase stop-loss insurance to cap catastrophic risk. About 65% of covered American workers are in self-funded plans.