Self-Funded vs. Fully Insured Dental Plans

When it comes to building a benefits package that balances cost, customization, and care, the choice between self-funded and fully insured dental plans is a critical one. Each option offers distinct advantages, and the right path depends on your organization’s size, goals, and risk tolerance. As dental plan costs continue to rise, more employers are exploring funding strategies to give them greater control and long-term value. Here’s what to consider when choosing the best fit for your business and your employees.

Understanding the basics

Fully insured plans are the traditional approach to dental benefits. Employers pay a fixed monthly premium to the insurance carrier, and in return, the carrier assumes financial risk for covered dental claims. That means whether claims are high or low in a given year, the employer’s cost remains stable. This model is simple to administer, offers predictable budgeting, and often includes built-in services like claims processing, compliance oversight, and customer service. However, premiums are based on projected claims and include margins for the carrier’s risk, overhead, and profit.

Self-funded (or ASO – Administrative Services Only) plans work differently. Instead of paying a premium, the employer pays for actual dental claims as they occur. The insurance carrier or third-party administrator provides the administrative infrastructure to process claims, manage the network, and support compliance. The employer retains the financial risk, which introduces variability in monthly costs and the potential for long-term savings. This model gives employers flexibility in plan design, visibility into utilization trends, and the ability to tailor coverage to their workforce. It’s attractive for larger organizations that can absorb short-term fluctuations in exchange for long-term control and transparency.

Why funding model and network strategy should be aligned

Network savings and funding mechanisms go hand in hand. As the dental market evolves, it’s not just about choosing how to pay for benefits; it’s about ensuring the delivery model supports better outcomes and smarter spending. According to 2024 market insights, over 30% of all groups with more than 500 lives now use a self-funded model for their dental plans. Organizations are increasingly seeking cost containment and reduced overhead, better cash flow control, and greater plan design flexibility.

Self-funded arrangements may also open the door to deeper data insights. With the right partners in place, like Ameritas, employers can access integrated medical and dental reporting that helps identify health patterns earlier, such as connections between oral health and chronic conditions. This added transparency can support more proactive decision-making and long-term improvements in employee outcomes and cost efficiency.

That said, fully insured plans remain the preferred choice for many employers, especially those seeking predictability, simplicity, and built-in risk protection. The key is finding the right balance between funding structure, administrative capacity, and the goals you have for a benefits strategy.

Key decision factors for employers

Ultimately, when evaluating which funding mechanism is the right move, employers should consider the following:

1. Size of the employee base
   Larger organizations may be better positioned for ASO plans, as more covered lives allow for more predictable claim trends over time. Smaller employers may find fully insured plans more manageable due to built-in risk protection and stability.
2. Risk tolerance
   ASO plans involve greater financial variability, since claims are paid as they occur. Employers who are comfortable managing this risk and interested in avoiding fixed premiums for unused services may benefit from the flexibility. In contrast, fully insured plans offer consistent monthly premiums, which appeal to organizations prioritizing stability and risk mitigation.
3. Cash flow management
   If maintaining steady and predictable expenses is a priority, fully insured plans benefit from set premiums and simplified budgeting. ASO models can provide savings over time but require employers to manage variable monthly costs based on actual claims.
4. Administrative capacity
   Self-funded plans typically require more internal resources for plan oversight, compliance, and reporting. Employers with smaller HR teams or limited administrative infrastructure may lean toward the simplicity of fully insured plans, where the carrier handles most services.

Choosing between a self-funded and fully insured dental plan ultimately comes down to understanding your organization’s needs and how you want to manage cost, flexibility, and risk. No single model is right for every group. By weighing the key decision factors and aligning your funding approach with your long-term goals, you can build a benefits strategy that works for your business and delivers real value to your employees.

At Ameritas, we work closely with employers to help evaluate funding models, assess risk, and design dental plans that are aligned with long-term wellness and business performance. Whether you’re looking for more predictability or flexibility, we’ll help you create a plan that delivers meaningful value for your people and your organization.

Sources and References:
ADA: Dental Services Affected by Country’s High Inflation (2022)
Artemis Health (2022)