There are two types of self-funded plans. The first is a partially self-funded health plan in which the employer assumes a portion of the risk for providing benefits to employees. The second is a fully self-funded plan in which the employer assumes all the risk. In either case, the advantage to employers is flexibility in designing the benefits they offer to their employees and avoidance of many of the costs associated with traditional insurance companies. 

The most popular form of self-funded health insurance is the partially self-funded plan. In these plans, the employer has stop-loss or reinsurance coverage that protects against large unpredictable claims. The employer's plan is designed to minimize risk exposure by providing coverage for large catastrophic claims, which are reimbursed by the stop/loss reinsurance in accordance with the plan document.

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