What financial strategy does self-funding particularly exclude?

Self-funding is a financial strategy used primarily by organizations to manage their own risk, particularly in the context of employee benefits like health insurance. By self-funding, an organization sets aside its own money to pay for claims rather than paying premiums to an insurance company.

The strategy inherently excludes the payment of monthly premiums because, in self-funding, the organization does not engage in traditional insurance methods where premiums are paid regularly to an insurance company for coverage. Instead, funds are allocated directly to cover the costs of claims as they arise. This approach allows organizations to maintain control over their financial resources and potentially save money if claims are lower than expected.

Understanding this concept clarifies why the focus on monthly premium payments does not align with a self-funding strategy, which emphasizes direct management of risks and finances rather than the pre-payment characteristic of traditional insurance models.