Instead of paying premiums to an insurance company, your company directly pays for employees' medical claims as they happen. You're essentially acting as your own insurer. Many self-funded plans work with a third-party administrator (TPA) to handle the paperwork, process claims, and manage the day-to-day operations, but the actual money for claims comes from your company's pocket. This gives you more control over your healthcare spending and plan design, and you keep any money that doesn't get spent on claims. The flip side is you're taking on more financial risk - if you have an unexpectedly expensive year with significant claims, you're the one covering those costs.