What does self-insuring refer to in employer health plans?

Self-insuring in the context of employer health plans refers to a situation where employers take on the financial risk of providing health coverage directly to their employees rather than paying premiums to an insurance company. This means that the employers will pay for all employees' medical expenses as they arise, rather than transferring that risk and associated costs to an insurance provider.

By self-insuring, employers often establish a fund to cover expected medical costs and may also utilize stop-loss insurance to protect against unexpectedly high claims. This approach can provide employers with greater flexibility and potential cost savings, as they are not tied to the premium increases that often accompany traditional insurance.

It's essential to differentiate this from the other options. Employees paying for their own medical bills does not entail the employer taking on risk. Employers covering all employees' medical expenses through a shared fund typically suggests a pooled risk model, which aligns more with fully insured plans. Requiring employees to have personal health insurance does not represent self-insuring but rather shifts the responsibility back onto employees.