A self-insurance policy can be found within an employer. These can be very popular and cost effective options for people wanting to obtain health insurance. They exist within corporations or businesses that offer different types of employee benefits insurance. The opposite would be a normal health insurance plan offered by an employer using a third party that determines premiums and benefits.
Employee benefits self-insurance programs include insurance companies formed, managed and owned by corporations. This means the corporation has hundreds of thousands of employees so they can predict losses from benefits given to employees. That way they can manage their exposure without buying. This is where it becomes more cost effective.
Employers that have self-insure plans pay medical claims directly instead of paying traditional policies. These plans give employers the freedom to control their health plans and costs. Self-insured health plans are exempt from state insurance laws that cover reserve requirements, premium taxes and state mandated benefits. Also, the employer does not have to prepay for coverage, which frees up more cash for the business or corporation.
In summary, self-insurance plans may be a good option for an employer that has thousands of employees. It takes a unique employer looking for more flexibility, but can increase their financial risk because they pay for claims out of pocket instead of paying a premium to an insurance carrier.