Self-Insurance can be used for any insurable risk that is predictable/measurable enough to be a risk, Self-Insurances is a risk management method in-which a calculated amount of money is set aside to compensate for the potential future loss. One example of a Self-Funded, Heath-Care program in- which a different employer helps contribute funds to the Heath-Care costs of its employees by contracting with a Third Party Administrator to help process the plan/claims. The employer may also need assistance with a Re-Insurer to pay amounts that exceed the policy threshold in-order to share the risk for a potential catastrophic claims experience.
If Self-Insurance is approached as a serious risk management technique, money is set aside using actuarial and insurance information and the Law of Large Numbers so that the amount set aside similar to an Insurance premium is enough to cover the future uncertain loss. This is different from insured plans where the employer contracts an Insurance policy to cover the employees and dependents. In Self-Funded Heath Care Plans, the employer assumes the direct risk for payment of claims for benefits.