The trend is clear: In recent years, self-funding has been steadily gaining popularity among companies of all sizes as an alternative to fully insured group health plans. As of 2023, 65% of employees were covered by a self-funded plan, compared to 44% in 1999. While self-funding was once embraced as a viable option only for larger corporations due to the substantial number of covered lives required for stability, rising costs and changes in regulations have made it more feasible than ever for smaller companies to go the self-funded route as well. 

For all its advantages, however, self-funding is not without its challenges – some of which may not become apparent in the first year of coverage. For one, stop-loss insurance is essential for protecting self-funded companies against large claims that could otherwise be financially devastating, but the rates for this necessary protection are skyrocketing. In 2022, companies saw an average increase of nearly 10% for stop-loss coverage premiums. This is on top of traditional health insurance premium increases for of 20% for family coverage over the past five years and 43% over the past 10 years. Stop-loss contracts also have varying costs depending on what type of contract you select and whether various components, such as lasering (a common practice that involves carving out higher deductibles for certain people) are included.