With self-insurance, the business predetermines and then pays a portion or all of the medical expenses of employees in a manner similar to that of traditional health care providers. Funding comes through establishment of a trust or a simple reserve account and a self-insured employer assumes the risk for paying the health care claim costs for its employees.
As with other health care plans, the employee generally pays a portion of the cost of premiums. Catastrophic coverage is usually provided through a "stop loss" policy, a type of coinsurance purchased by the company. The plan may be administered directly by the company or through an administrative services contract. Businesses with self-insured health plans are not subject to taxes, benefit requirements, profit limits, or other provisions of the Affordable Care Act.
