Certified Revenue Cycle Representative (CRCR) Practice Exam

Who typically self-insures?

1. Individuals purchasing personal health plans

2. Small businesses with under ten employees

3. Large employers who take direct responsibility for paying employee healthcare

4. State-run healthcare programs

The correct answer is: Large employers who take direct responsibility for paying employee healthcare

Self-insurance is a practice where an entity takes on the financial risk of insuring its own costs rather than transferring that risk to an insurance company. Large employers commonly engage in self-insurance for their employee healthcare benefits. This is because they have the financial resources to cover potential claims and the ability to predict costs based on their employee population. By self-insuring, large employers can save on premium costs paid to insurance companies and have increased control over the plan design and claims management. They often set aside funds to cover potential claims and may contract with third-party administrators to handle the claims processing, rather than relying on an insurance carrier. In contrast, individuals purchasing personal health plans typically rely on insurance to cover their healthcare costs, due to the unpredictability and potential severity of those costs. Small businesses, particularly those with fewer than ten employees, may face challenges associated with self-insurance, such as not having sufficient cash flow to cover unexpected expenses. State-run healthcare programs usually operate under a different structure and funding method that isn't categorized as self-insurance, as they often utilize government funding and insurance principles.