What are self-insurers?

• A. Individuals that designate money reserves to cover potential losses
• B. Government agencies that insure everyone
• C. Insurers that only write reinsurance
• D. A risk management technique of hedging only with derivatives

Answer: (A)

Self-insurance means individuals or organizations retain the financial risk of losses themselves, funding potential claims from reserves rather than paying premiums to an insurance company. In health plans, a self-insured entity pools funds to pay claims as they arise and may use stop-loss coverage to protect against very large claims. This approach relies on having sufficient cash flow and risk-management processes to cover expected and unexpected costs.

The other options don’t fit because they describe different concepts: universal government programs that insure everyone involve public coverage, not self-funding by the insured party; reinsurers sell protection to other insurers rather than funding their own claims; and hedging with derivatives is a financial strategy, not paying actual health care claims out of a reserve.