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Being self-insured, or self-funded, means that instead of paying out a potentially exorbitant premiums to an insurance company to cover all plan costs, the employer only funds the health claims of their participants (and their dependent(s) as such claims are incurred.
While this may give the appearance of taking on more risk, in actuality, it is not. When claims experience is average or favorable, the self-insurer will realize savings by not having paid the excess margins built into insurance premiums. In the event of poor claims experience, the self-insurer will utilize itsstop-loss insurance coverage to control the cost.
Self-funding also provides many other benefits: