Question

ABC Hospital has elected as a risk financing option to manage medical professional liability losses through an unfunded program of self-insurance that is supported by borrowed funds. Discuss whether this is an appropriate risk financing option? 200 words

Answer 1

Risk financing programs include insurance valuation plans, self-insurance that is backed by borrowed funds.

This is an appropriate risk financing option because insurance itself is a must and the risk with you regarding health care and medical treatment.

A firm allocates funds each period to pay for losses. No funds pay for any losses and you have to pay the loan money for the losses that occur. finances are very important for every organization and every hospital. So the risk always arises, so self-insurance is backed by borrowed funds.

When a company forgoes buying insurance buy uses planned & funded retention. Self insurance is a formal program, it is a well thought out strategy. The company usually do self-insurance when Usually for significant loss exposures where many exposure units exist. The benefits are given to Takes care of losses that are fairly predictable (medical plan for employees) and they have long payout periods (Workers compensation). Insurance contracts are very standardized like a menu and don't allow for flexibility. Self insurance bypasses that and they can avoid state mandated benefit laws. With self-insurance there are no premium taxes, no administrative expenses, and no marketing expenses. Purchase stop loss insurance but you must pay a premium and you are buying insurance. firm has to handle claim settlements, return to work programs, wellness programs etc.