Tom's Take Blog

March 8, 2018

Why are so many states choosing to self-fund their employee health benefits?

Tom’s Take: While the switch to self-funding has increased for both public and private sector employers, state governments are one group that has really embraced this structure.


How many states would you guess offer self-funded plans today? This number may be higher than you think! The National Conference of State Legislatures (NCSL) reports that 46 of the 50 are currently self-funding in some capacity, with at least one benefit plan option of this type offered. There are also several states that self-fund exclusively.


So why do 92% of states self-fund at least some of their employee health benefits? I think what it comes down to is that governments – just like private employers – realize the financial advantage of assuming this risk. Like any entity that self-funds, states must consider the larger financial picture and weigh the potential expenses and savings involved. In doing so, many are finding that managing health claims through self-funding provides an opportunity to save more money and have better control of plan dollars.


Another big draw is flexibility. State governments don’t want to be boxed in by a plan that limits benefit offerings. They have diverse workforces with diverse needs and are choosing self-funding to create plan options that allow for greater customization.


With 46 states already offering some sort of self-funded plan, it will be interesting to see how many expand their selections under this structure and if any others consider moving exclusively to self-funding.

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