If you're an employer offering a fully insured health plan, you might feel like controlling health care costs is out of your hands. Your rates continue to rise, with little to no claims data to justify the increases. The current industry players offer few alternatives to lower the cost. And there's no reward for you or your employees if your company has a low-claims year. So when it comes to rate hikes, you can either find more budget or raise deductibles and copays to shift costs onto your employees.

So why are so many employers simply accepting the status quo? Is it fear of the unknown? Risk aversion? Or plain old inertia? Perhaps it's more a misunderstanding of when a different option – like self-funding – makes sense, or how to even get started. We're here to break it down.

Hang on – self-funding sounds risky

Health care benefits are all about risk financing – and one option isn't necessarily riskier than the other. To put it simply, the key difference between a fully insured and self-funded health plan is who assumes the risk for paying claims. In a fully insured plan, all premiums remain with the insurance carrier at the end of the plan year, whether they were paid out as claims or not. A self-funded plan, on the other hand, is not a use-it-or-lose-it situation. The company pays only for actual claims, with protection for large claims or realized savings when claims are lower.