A plan in which an employer pays insurance benefits from current revenues is known as

• A. A self-funded plan
• B. Fully insured plan
• C. Group policy
• D. Modular plan

Answer: (A)

Funded from the employer’s own resources and with the employer bearing the actual cost and risk of claims. In a self-funded plan, the employer pays benefits out of current revenues as claims come in, rather than paying fixed premiums to an insurance company. To manage administration, a third-party administrator may handle claims, and stop-loss coverage is often purchased to cap potential losses.

This differs from a fully insured plan, where the employer pays premiums to an insurer and the insurer bears the risk of claims. A group policy is typically an insurance policy issued by an insurer to cover a group, funded by premiums. A modular plan refers to a design approach, not to who pays or who bears the risk.