Ace the Illinois Health Insurance Exam 2025 – Insure Your Success Today!

In a self-insured plan, the employer assumes the financial responsibility of directly paying for all employee healthcare costs. This means that rather than purchasing a traditional health insurance plan from an insurance company, the employer sets aside funds to cover medical claims and health expenses as they arise. This approach allows the employer to have greater control over healthcare costs and plan design, as they are responsible for managing the risk associated with health care expenses.

The self-insured model can be more cost-effective in the long run, especially for larger organizations with a sufficient number of employees and predictable healthcare costs, as it eliminates the need for premium payments to an insurance provider. Instead, the employer uses its own funds to pay out claims while potentially using a third-party administrator to manage the administrative duties associated with the plan.

This model differs from other options in that purchasing insurance (as indicated in the first choice) involves transferring risk to an insurance company, while solely covering administrative costs (the third choice) does not capture the full extent of financial responsibility that includes paying for medical claims. Lastly, sharing costs with insurance companies (the fourth choice) implies a different approach where the risk is shared, which does not align with the self-insured concept where the employer bears the primary financial responsibility.