Is A Fully Funded or Self Funded Insurance Plan Better For My School?

Suzy owns a Montessori school in Tyler, and she loves what she does. Every day, she gets to watch children grow, explore, and learn in a hands-on way. But running a school isn’t just about the kids. It’s also about taking care of her teachers who make it all possible. Suzy knows she needs to provide health insurance for her employees or she runs the risk of losing some to other schools.

The more she reads about employee health plans, the more confused she feels. She sees words like fully-insured plans and self-insured plans, but the explanations might as well be written in another language. Many health benefit plans sound too expensive. Others seem really risky since she had never heard of the companies offering them. And then there’s all the talk about cost of claims, provider networks, and monthly premiums.

Suzy knows she needs to make an informed decision, but she doesn’t have time to become an insurance expert. If you’re like Suzy, you’re not alone. Many Texas small business owners struggle to understand their health insurance options. Let’s break it down in a way that makes sense so you can choose the right plan for your business.

Costs, Cash Flow, and Risk: What’s the Real Difference?

One of Suzy’s biggest concerns is the out of pocket cost of offering health insurance through her business. She wants a plan that fits her school’s annual budget, but she also doesn’t want to be caught off guard by unexpected medical expenses. As she explores her options, she realizes that how a plan is paid for makes a big difference in how much she will pay and how much financial risk her school will take on.

There are two main ways to fund a health insurance plan. Fully-insured plans are what most people think of when they hear "health insurance." You pay a set amount each month, and the insurance company takes care of the rest.

Self-funded plans work differently. Instead of paying fixed premiums, the business pays for medical expenses a employee claims are submitted as they happen. This can lead to savings, but it also carries some risk as catastrophic claim payments can not truly be predicted.

• Fully-Insured Health Insurance gives Suzy a predictable monthly cost. She pays a premium to the insurance company, and they handle all claims risk. No surprises, no extra charges—just one fixed bill each month.
• Self-insured plans mean lower costs upfront. Instead of paying a fixed premium rates, Suzy only pays for actual medical claims. This can save money, but if her employees have a lot of medical expenses, her costs could be higher than expected.
• Stop-loss insurance can help manage the risk of self-funded plans. This type of loss coverage protects businesses if medical costs from claims expenses get too high. It’s a way for Suzy to take advantage of potential savings while still having a safety net.
• Renewal rates change over time. With fully funded plans, the insurance carrier raises premiums based on past claims. With self-funded insurance, Suzy has more control over cost. The problem is that she also takes on more responsibility for managing the healthcare expenses of her employees.

Suzy sees the benefits of both approaches. Fully-insured health insurance offers stability, while self-insured plans could save her money. Now, she needs to think about how much control she wants over the plan options being offered.

Plan Customization: How Much Control Do You Need?

Suzy runs her Montessori school differently than a traditional daycare. She believes in hands-on learning and letting kids explore at their own pace. She realizes that she wants the same kind of flexibility in her school’s healthcare plan. Some of her employees are young and single, while others have families. A one-size-fits-all plan might not be the best fit for everyone.

Fully funded and self-funded plans offer very different levels of control. The question is, how much control does Suzy want?

• Fully funded plans come as they are. The insurance company decides which doctors are in-network care, what’s covered, and how much employees pay for doctor visits. Suzy’s school would have to follow the plan administrator’s rules with little room for change.
• Self-insured plans let Suzy make more choices. She could decide which health insurance benefits matter most to her employees and even choose specific providers if she wanted. This flexibility could be a big advantage, especially if she wants to offer health care benefits like telemedicine or mental health support that set her apart from others.
• Customization comes with responsibility. With more control comes more work. A self-funded plan would require Suzy to manage her claims fund and keep an eye on health care costs. She could work with a third-party administrator to help, but it would still be her responsibility and the administrative costs could eat into the savings.
• The best choice depends on priorities. If Suzy wants a simple, no-hassle plan, a fully-insured health insurance option might be better. If she’s willing to put in a little more effort to save money and offer different benefits, a self-funded insurance plan could be worth it.

Suzy likes the idea of giving her employees a more personalized type of plan. But she also wants to make sure it makes sense in the long run from a financial risk standpoint.

Long-Term Savings: Who Keeps the Extra Money?

As Suzy kept digging, she realized that choosing between a fully funded and a self-funded plan wasn’t just about today’s costs—it was also about what happens to extra money down the road. With a fully funded plan, her school would pay the same premium every month, no matter how much or how little her employees used healthcare. If her staff stayed healthy and didn’t visit the doctor often, the insurance company would keep the extra money. That didn’t sit well with Suzy. It felt like paying for something she might not fully use.

Self-funded plans, on the other hand, worked differently. She understood that paying a set amount every month to a third-party administrator would help her school cover the costs of healthcare claims as they came up. Having stop-loss insurance as part of this payment also meant that a shock claim wouldn't bankrupt her school.

She also realized that if her staff had a healthy year with fewer doctor visits that required medical care, the school could get a refund from their administrative service when the year's claim processing was complete. Over time, this could mean big savings that could go back into her school, her teachers, or even future benefits for her employees.

Thinking about the long-term impact of her decision made Suzy pause. On one hand, a fully funded plan gave her immediate stability. She’d always know exactly what her school would owe in each month's payments, even if it meant paying more than necessary in a good year.

On the other hand, a self-funded plan could save her money over time—if she was willing to take on a little more administrative burden. She realized that the best choice wasn’t just about cost. It was about what worked best for her employees, her school, and her peace of mind.

Let’s Find the Right Health Plan for Your Texas Business

Fortunately, Suzy didn't have to figure this out alone, and neither do you. Finding the right health insurance plan for your Texas small business takes time and expertise. Since you don’t have hours to spend sorting through complicated terms and endless options, the independent brokers at Insurance For Texans is here for you and your business.

At Insurance For Texans, we help small businesses across Texas find the best health insurance solutions. Whether you’re looking for the predictability of a fully funded plan or the cost-saving potential of a self-funded plan, we’ll walk you through your options in a way that makes sense. We specialize in helping Montessori schools and daycares, just like Suzy’s, find plans that fit their needs and budget.

If you’re ready to explore your options, click the button below and let’s get started. Your employees deserve great health coverage, and your business deserves a plan that works for you.