Instead of paying an insurance company to pay claims and handle paperwork and cost reviews, a self-insured employer or plan puts the money into a trust fund, either qualified or non-qualified by the IRS, and that trust fund pays the claims. Any money not used for claims can be kept to offset future expenses. To avoid catastrophic losses, employers usually buy stop-loss insurance, which sets in advance their maximum potential claims loss. 

Employers use a third-party administrator, like TPA of Georgia, to perform many of the functions carried out by traditional insurance carriers, such as claims management, plan reporting, plan documentation and legal compliance.

What are the advantages of Self Insurance?

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