In a self-funded plan, the employer sets aside funds to pay for employee claims, rather than paying a premium to an insurance company. This allows the employer to potentially save money on administrative costs and pass on those savings to employees. With a self-funded insurance plan, companies typically earmark funds in their budget to pay for claims as they arise instead of paying a premium to an insurance carrier. Self-funded plans allow companies to design the health plan that best fits their employees’ needs.