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Types of Coverage
Self insurance (sometimes called self funding) plans can be established for group health insurance. Workers' Compensation plans may also be self-insured. Employers can chooses to self insure either or both of these benefits as state regulations allow.
By choosing a self-insured plan, the employer agrees to bear the financial risk of providing health care benefits to its employees. In essence, your employer would pay for your trip to the doctor or hospital rather than pay a monthly fixed premium to a health insurance provider.
Employers who opt for self insurance have the benefit of improved cash flow since they are not pre-paying for coverage or paying for service that may never be
used. Also, they may contract with the health care providers of their choice to best suit their employees' needs. On the other hand, employers assume the risk to pay for health care and must have available cash. Needs can be unpredictable.
Workers' Compensation Plans
Like health care coverage, employers who opt for self-insured Workers' Compensation plans agree to pay the cost of the benefit as the need arises. In some instances, employers may form a group to provide this benefit.
Cost containment and improved cash flow are two primary benefits of self-insurance Workers' Compensation; however, the employer must maintain cash reserves to pay for coverage when it's needed. Also, there are a few states that do not allow self-insured plans for Workers' Compensation.