In health insurance, an annual deductible refers to the amount of money that an individual must pay out of their own pocket for covered healthcare services before the insurance company begins to contribute to the cost. Essentially, it is a fixed annual amount that the insured person must reach before the health insurance coverage starts sharing the financial responsibility for medical expenses.

For example, if a health insurance plan has an annual deductible of $1,000, the policyholder is required to pay the first $1,000 of eligible medical expenses in a given calendar year. Once this deductible is met, the insurance coverage typically shifts to a co-insurance or co-payment arrangement, where the insured and the insurance company share the costs of covered services. It's important to note that not all services may count towards the deductible, and preventive services are often exempt.

The annual deductible amount can vary widely depending on the specific health insurance plan and can be influenced by factors such as the plan type, coverage level, and whether it's an individual or family plan. Generally, plans with higher deductibles often come with lower monthly premiums, creating a trade-off between upfront costs and out-of-pocket expenses for healthcare services. Understanding the terms of the annual deductible is crucial for individuals when selecting a health insurance plan and managing their healthcare costs throughout the year.

Self-funded health insurance, also known as self-insurance, is a healthcare financing arrangement where an employer assumes the financial risk for providing health benefits to its employees. In a self-funded plan, the employer acts as the insurer, paying the healthcare expenses directly rather than purchasing a traditional insurance policy from a carrier. This approach allows companies to have more control over their healthcare benefits and potentially save on costs.

In a self-funded health insurance model, the employer establishes a fund from which it pays for employees' medical claims and related administrative expenses. To mitigate the financial risk, many employers purchase stop-loss insurance, which kicks in when the total claims exceed a specified threshold. This stop-loss insurance helps protect the employer from catastrophic or unexpected healthcare costs.

One of the key advantages of self-funded health insurance is the flexibility it offers to customize benefit plans according to the specific needs of the workforce. Employers have the flexibility to design and implement wellness programs, cost-sharing arrangements, and other initiatives aimed at improving employee health and controlling healthcare expenses.

However, self-funded health insurance also comes with potential financial risks, as employers are directly responsible for covering the healthcare costs of their employees. Factors such as unexpected high claims or a less healthy workforce than anticipated can impact the financial stability of self-funded plans.

Self-funded health insurance is commonly adopted by larger employers who have the financial resources to manage the associated risks and administrative complexities. Smaller employers may find self-funding less practical due to the potential for volatile claims experience. Overall, self-funded health insurance represents an alternative approach to traditional insurance models, offering employers greater flexibility and control over their healthcare benefits.