Which plan involves a company choosing not to buy insurance and paying claims with internal funding?

Which plan involves a company choosing not to buy insurance and paying claims with internal funding?

• A. Self-administered Plan
• B. Self-insured Plan
• C. Recovery
• D. Non-waiver agreement

Answer: (B)

Self-insured (self-funded) plans involve the company assuming the financial risk of paying employee claims from its own funds rather than purchasing insurance and paying fixed premiums. The employer funds and settles claims internally, often with a third-party administrator handling the administrative tasks and stop-loss coverage to protect against very large claims. This setup matches paying claims with internal funding instead of buying insurance. A self-administered plan describes who handles administration, not who bears the risk, so it can still be insured. Recovery and non-waiver agreement are unrelated to the financing and risk-bearing approach of a plan.

Self-insured (self-funded) plans involve the company assuming the financial risk of paying employee claims from its own funds rather than purchasing insurance and paying fixed premiums. The employer funds and settles claims internally, often with a third-party administrator handling the administrative tasks and stop-loss coverage to protect against very large claims. This setup matches paying claims with internal funding instead of buying insurance. A self-administered plan describes who handles administration, not who bears the risk, so it can still be insured. Recovery and non-waiver agreement are unrelated to the financing and risk-bearing approach of a plan.