Self-insurance also poses some risks. If a group experiences higher than anticipated costs, they may be forced to move back into a fully insured arrangement and pay unusually high premiums. Self-insurance may also be burdensome administratively and politically. Also, risk pooling might allow small funds to join together and self-fund their benefits. When claims are significantly different among funds, however, risk pooling can be difficult, both technically and politically.
Some coalitions partially pool their risks.
Then, each fund makes a payment or receives rebates based on risk factors, such as their demographics and claims experience. The coalition can base the portion of the premium for actual medical costs on the claims experience of each fund and spread other costs, such as administration and marketing fees, among the entire group. Self-insured funds can pay claims up to a certain pooling point based on their own experience. Claims in excess of the pooling point can be covered by a pooled stop-loss arrangement in which all funds participate. Generally, smaller funds favor group purchasing and risk pooling because such arrangements offer them greater bargaining clout than they would have otherwise.