What plan involves not purchasing insurance and paying certain claim amounts using 100% internal funding?

What plan involves not purchasing insurance and paying certain claim amounts using 100% internal funding?

• A. Reservation of Rights letter
• B. Regulatory or statutory liability
• C. Self-administered Plan
• D. Self-insured Plan

Answer: (D)

Self-insured plans involve the organization bearing the financial risk and paying claims out of its own funds rather than buying a traditional insurance policy. The description of not purchasing insurance and paying certain claim amounts with 100% internal funding matches this approach, where the sponsor funds claims directly (often with a third-party administrator handling claims processing but without transferring the risk to an insurer). A self-administered plan focuses on who processes the claims, not how the funding is provided, and can still involve insured arrangements. The remaining options describe insurer communications or liabilities that aren’t about funding the claims internally.

Self-insured plans involve the organization bearing the financial risk and paying claims out of its own funds rather than buying a traditional insurance policy. The description of not purchasing insurance and paying certain claim amounts with 100% internal funding matches this approach, where the sponsor funds claims directly (often with a third-party administrator handling claims processing but without transferring the risk to an insurer). A self-administered plan focuses on who processes the claims, not how the funding is provided, and can still involve insured arrangements. The remaining options describe insurer communications or liabilities that aren’t about funding the claims internally.