Walk into any therapy practice around 7 a.m., and you’ll sense it immediately—phones ringing off the hook, front-desk staff juggling paperwork, and clinicians grabbing coffee before the day's rush. Behind that early-morning hustle is an often-hidden headache: health insurance costs. Having spent over a decade interviewing clinicians and administrators, I've heard it countless times—healthcare premiums are spiraling, coverage is shrinking, and frustration is mounting.
That’s why I’m seeing more therapy practices take an interest in self-funded plans. Unlike the traditional setup, where you pay premiums and hope for the best, self-funded plans put you squarely in the driver’s seat. You take control, you handle claims directly, and, in theory, you keep more of your money.
Sound appealing? It might—but let’s unpack what a self-funded plan really is, how it works, and whether it could be the right choice for your practice.
First things first: What exactly does “self-funded” mean? Simply put, a self-funded (or self-insured) plan is one where the employer directly pays for employees’ healthcare claims. Instead of cutting a hefty monthly premium check to an insurance company—crossing your fingers that claims stay low—you handle medical expenses as they happen.
To make this work smoothly, most organizations partner with a third-party administrator (TPA). Think of the TPA as your air traffic control: they process claims, handle paperwork, coordinate with healthcare providers, and keep everything compliant with federal guidelines.
How does it differ from traditional insurance? Here’s the snapshot:
Over the years, I've talked to countless clinic owners and heard variations of the same complaint: “We have no idea what our premiums really cover, and costs just keep rising.” Self-funded plans offer a refreshingly different approach—one built on clarity, control, and potential cost savings.
Traditional insurance always carries built-in padding for risk and profit. With a self-funded plan, though, you're paying for exactly what your employees use—not a penny more. That can translate into tangible savings, particularly if your clinic has a stable and predictable health profile.
Ever try asking an insurance company for detailed claims data? It’s like pulling teeth. With self-funding, you have direct access to that information. Want to spot emerging trends—say, increased utilization of mental health services or physical therapy? You have the visibility and flexibility to respond immediately.
Perhaps what draws healthcare providers most strongly to self-funded plans is the ability to design benefits that genuinely reflect their team's needs. After all, who knows better than you what's most beneficial for your clinic staff? Need more robust coverage for specialized therapies or wellness initiatives? Self-funding makes that easier to implement.
Many clinic owners don’t realize it, but traditional insurance premiums include various state taxes and mandated fees. Self-funded plans typically bypass these costs—another reason they’ve grown increasingly popular among practices mindful of their bottom line.
If this sounds appealing, you might be wondering how it all works in practice. Here’s a clear, step-by-step breakdown:
As the employer, you decide what your health plan covers. This includes choosing deductible amounts, copays, and which types of healthcare services—speech therapy, ABA, mental health counseling—you'll prioritize. You shape your benefits package based on what your team genuinely values.
Selecting the right TPA can make or break your self-funded plan. They handle all the day-to-day stuff—claims processing, provider networks, compliance, and employee questions. Having a reliable TPA means you’re free to focus on running your practice, rather than getting tangled up in bureaucratic red tape.
Unlike sending monthly premiums to an insurance company, you’ll maintain a special reserve account dedicated solely to healthcare costs. You’ll fund this account based on expected claims, historical data, and forecasts provided by your TPA. This is your financial safety net, available whenever an employee needs medical care.
When an employee visits a doctor or therapist, the provider submits the claim to your TPA. The TPA verifies the claim, pays the provider directly from your dedicated account, and sends you detailed reports on all transactions. It’s straightforward, transparent, and puts you firmly in control.
Now, you're probably thinking—what if someone needs major surgery or faces a catastrophic health issue? Great question. That's why most employers who self-fund also purchase stop-loss insurance. It kicks in whenever claims exceed a pre-set threshold, protecting your practice from unpredictable, high-cost scenarios.
There are two main types of stop-loss coverage:
Good question. Level-funded plans offer a middle ground between traditional insurance and fully self-funded plans. With level-funding, you pay fixed monthly amounts (covering expected claims, admin fees, and stop-loss insurance). If claims are lower than anticipated, you may receive a refund or credit at the end of the plan year. It’s like dipping your toe into self-funding without diving headfirst.
Typically, a third-party administrator (TPA) handles all claims management, paperwork, and compliance responsibilities. They act like the back-office operations team—keeping everything running smoothly so you don't have to worry about the details.
Think of stop-loss insurance as your financial safety net. It steps in if a single large claim—or total claims across your staff—exceed the threshold you've set. Without it, even one unexpected major health event could derail your finances for the year.
Yes. Self-funded plans are primarily regulated under federal ERISA law, rather than state insurance rules. This generally gives employers more freedom in structuring plans—but it also means you need to stay diligent about federal compliance and reporting requirements.
The biggest risk is financial unpredictability. Since you're directly responsible for claims, an unexpected wave of medical bills can quickly stress your reserves. That's why careful financial planning and adequate stop-loss coverage are so important. Administrative complexity is another factor—although a good TPA should minimize this.
In all my years of visiting clinics and hospitals nationwide, one thing has become crystal clear: the healthcare landscape is changing fast, and traditional insurance models aren't cutting it for everyone. Self-funded plans offer a compelling alternative for therapy practices eager to control costs, tailor benefits precisely, and better understand where their healthcare dollars go.
But I'll be candid—self-funding isn't for everyone. You need a good grasp of your employees’ healthcare patterns, a strong administrative partner (your TPA), and an appetite for managing financial risk.
If your clinic is tired of the opaque world of traditional insurance premiums and ready for a fresh approach, self-funding might be the right prescription. At the very least, it’s worth serious consideration.
