Self-Funded Health Plans: What Louisiana Employers Need to Know

What self-funded health plans are, how stop-loss insurance works, and whether your Louisiana group qualifies.

What Is a Self-Funded Health Plan?

With a traditional fully insured health plan, your company pays a monthly premium to an insurance carrier. The carrier pools your premium with thousands of other employers, assumes all the risk, and pays claims from that pool. You get predictability. The carrier gets your surplus.

With a self-funded plan, your company pays employee healthcare claims directly as they occur — rather than prepaying through a premium. The insurance carrier or a third-party administrator (TPA) handles the administrative side: processing claims, managing the network, handling member services. But the money for actual medical claims comes from your company.

In exchange for assuming that risk, self-funded employers gain:

- Full claims transparency — you see exactly what's being spent, on what, and where

- Plan design control — you're not locked into a carrier's standard benefit package

- Cost savings of 10–30% — by eliminating carrier profit margins, premium taxes, and state benefit mandates that don't apply to self-funded plans under ERISA

- Cash flow advantages — you pay claims as they happen, not upfront as inflated premiums

The Role of Stop-Loss Insurance

The biggest concern employers have about self-funding is risk. What happens if an employee has a catastrophic illness or injury? What if your claims spike in a bad year?

Stop-loss insurance addresses this directly. It's a secondary insurance policy that protects self-funded employers against unexpectedly high claims — and it comes in two forms:

Specific (Individual) Stop-Loss: Protects against any single member's claims exceeding a set threshold — called the attachment point — in a plan year. Common attachment points range from $25,000 to $150,000 per individual. Once a member's claims exceed that threshold, your stop-loss carrier covers the rest.

Aggregate Stop-Loss: Protects against total plan claims exceeding a set percentage of expected costs — typically 120–125% of projected annual claims. This is your protection against a bad year across the entire group.

With properly structured stop-loss coverage, a self-funded employer's maximum financial exposure in any given year is defined and capped — similar in practice to a fully insured plan, but with substantially lower costs in normal and good claims years.

What Self-Funded Plans Cost (and Save)

Self-funded plan costs have three components:

1. Fixed costs: TPA administrative fees, stop-loss premiums, network access fees. These are known in advance — typically 20–25% of total plan costs.
2. Variable costs: Actual medical claims paid on behalf of your employees. These fluctuate month to month.
3. Pharmacy costs: Usually managed through a separate PBM arrangement with full transparency into spread pricing and rebates.

The savings come from three places:

- Elimination of premium taxes (2–3% of premium in Louisiana)

- No carrier profit margin built into your cost

- ERISA preemption of certain state benefit mandates — meaning you don't have to cover benefits required by Louisiana state law that your workforce doesn't need or use

For Louisiana employer groups with 50–500 enrolled employees and reasonable claims history, self-funded plans routinely deliver 10–30% cost reductions compared to renewing a fully insured plan.

Is Self-Funding Right for Your Louisiana Business?

Self-funded plans work best for:

Employers with 50+ enrolled employees — Below this threshold, individual high-cost claims can represent too large a percentage of total plan costs to manage predictably, even with stop-loss. (Level-funded plans are typically the better fit for smaller groups.)

Groups with 2+ years of claims history — Claims data lets your TPA and stop-loss carrier price the plan accurately and gives you a baseline to measure savings against.

Employers with relatively stable workforces — High turnover creates underwriting challenges and can make claims experience unpredictable.

CFOs and HR leaders who want visibility — Self-funded plans come with detailed monthly reporting. If your leadership team wants to understand exactly where healthcare dollars are going — and make data-driven decisions about plan design — self-funding provides that in a way fully insured plans never can.

Common Misconceptions

"Self-funded plans are only for large corporations."

False. Groups as small as 25–30 enrolled employees can access self-funded arrangements, particularly through level-funded structures or group captives. The market has evolved significantly over the past decade.

"Self-funding means taking on unlimited risk."

False. Stop-loss insurance caps your exposure. A well-structured self-funded plan has defined maximum costs — the difference is you get refunded when you come in under that maximum, rather than handing the surplus to a carrier.

"My broker would have told me if self-funding made sense."

Not necessarily. Brokers compensated on a percentage of premium have a structural incentive to keep you on fully insured plans. Independent analysis matters.

Next Step

If your Louisiana employer group has 25 or more enrolled employees, a self-funded plan analysis is worth 30 minutes of your time. We'll review your current plan, pull available market options, and give you an honest assessment — including scenarios where self-funding doesn't make sense for your group.

Get a free self-funded plan analysis →