Self-Insured

An employer or other purchaser is said to be self-insured if it takes direct responsibility for paying claims for healthcare services for its employees or members rather than purchasing health insurance policies from a separate health insurance company for each employee. The majority of individuals in the U.S. who have employer-sponsored health insurance are part of a self-insured plan. Most self-insured employers are not completely self-insured; in addition to maintaining some level of financial reserve to cover claims costs, they generally purchase stop-loss insurance to protect them against large claims expenses (see Stop-Loss). Also, most self-insured employers do not pay the claims themselves, but they hire a Third Party Administrator (TPA) to pay those claims (under what is known as an Administrative Services Only (ASO) contract) and then the self-insured employer pays the TPA for the actual cost of the claims plus an administrative fee. The TPA may or may not be a company that also sells health insurance policies. See Fully-Insured for comparison.

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