What big companies are self-insured?

Large companies self-insure primarily for employee health benefits and workers' compensation, meaning they pay claims directly out of their own cash reserves rather than paying fixed premiums to an outside carrier. Approximately 77% of companies with over 1,000 employees use self-funded health plans.

🏢 Major Self-Insured Companies

• Costco Wholesale Corp. – Self-insures both employee health programs and workers' compensation liabilities.
• Federal Express Corporation – Manages its own internal risk pools and employee healthcare claims administration.
• General Motors, LLC – Utilizes self-funded structures for its massive workforce's medical benefits.
• Lowe's Home Centers, Inc. – Assumes direct financial risk for employee health and injury claims.
• Hyatt Hotels Corporation – Funds medical and compensation claims internally via designated corporate reserves.

📊 How Large-Scale Self-Insurance Works

• Risk Assumption: The corporation pays actual medical or injury claims directly instead of prepaying insurance profit margins.
• Third-Party Administrators (TPAs): Companies hire external firms strictly to handle paperwork, networks, and claims processing.
• Stop-Loss Protection: Corporations buy specialized reinsurance for catastrophic, ultra-high-cost individual claims.
• ERISA Exemption: Self-funded health plans fall under federal ERISA rules, bypassing conflicting state-level mandates and premium taxes.

Wealthy people typically do not fully self-insure major assets; instead, they buy comprehensive traditional coverage while using partial self-insurance strategies like higher deductibles.

Why Wealthy Individuals Keep Insurance

• Catastrophic Risk Transfer: Wealthy families view insurance as a tool to protect accumulated capital from massive, unexpected losses rather than paying for small, routine items.
• Value-Added Services: High-net-worth insurance carriers often provide essential concierge services—such as disaster warnings, private security, and mobilized recovery contractors—that self-insured individuals must secure entirely on their own.
• Liability Protection: Affluent people buy extensive liability coverage and personal umbrella policies to shield their large balance sheets from lawsuits.
• Tax and Liquidity Strategy: Forcing a sudden multi-million-dollar liquidation from a portfolio during a market downturn to cover a major loss or long-term care can permanently impair wealth and trigger steep capital gains taxes.

How Partial Self-Insurance Works

• Higher Deductibles: Affluent households routinely take on minor risks by choosing large deductibles to lower regular premium costs.
• Retaining Minor Losses: They absorb small, everyday medical costs or minor property repairs out of pocket because the math makes paying a premium unnecessary.
• Full Self-Insurance Growth: A small and growing group of ultra-high-net-worth individuals do fully self-insure specific assets, but this usually happens only when property values represent a tiny fraction of a massive net worth.

Yes, Costco is self-insured for specific internal operations like employee workers' compensation, but it uses external insurance companies for member-facing products.

Workers' Compensation and Internal Programs

• Workers' Compensation: Costco operates as a self-insured employer for workers' compensation in various states (such as Washington and Massachusetts). This means Costco pays for employee injury claims directly out of its own funds rather than paying a traditional fixed premium to a state fund or insurance carrier.
• Third-Party Administrators: Costco often uses third-party administrators to manage and process these self-insured workers' compensation claims.
• Employee Health Benefits: Certain internal employee health and medical benefit arrangements may function with third-party networks or administrators where the company handles the financial backing or billing structure, though specific welfare plans can vary by state and offering.

Member Insurance Services

• Third-Party Underwriters: For products offered to customers and members (such as auto, home, or health insurance marketplaces), Costco does not act as the insurer.
• Partnerships: The Costco Insurance Agency acts as a licensed agent, but policies are officially underwritten and paid by external licensed insurance providers like American Family Insurance.

Amazon uses a self-funded (self-insured) model for its employee health plans while maintaining corporate and commercial insurance policies for other business operations.

Employee Health Benefits

• Self-funded plans: Amazon pays for actual employee medical claims directly out of its own funds rather than paying a fixed premium to an outside insurance carrier.
• Third-party administrators: Amazon partners with external networks and administrators to manage claims and networks, but the financial risk of the medical costs belongs to Amazon.

Corporate Liability and Operations

• Corporate coverage: For general corporate risks, property, and larger owned delivery trucks, Amazon maintains traditional corporate insurance programs and policies (outlined in Amazon's Memorandum of Insurance).
• Third-party sellers and partners: Amazon requires third-party sellers on its marketplace and independent Delivery Service Partners (DSPs) to carry their own commercial liability or auto insurance policies rather than insuring them directly.

Being self-insured is worth it only if you have substantial financial resources or stable, predictable expenses, but it carries high risks for major, unexpected losses.

Self-insurance means setting aside your own personal or corporate funds to pay for potential losses directly instead of paying regular premiums to an insurance company. Whether it makes financial sense depends entirely on what you are trying to cover.

When Self-Insurance Works Well

• Minor and Predictable Expenses: Skipping extended warranties on electronics or choosing a higher deductible on an existing policy are safe, everyday forms of self-insurance.
• Life Insurance for the Wealthy: Financial planners like those at Ramsey Solutions note that self-insuring for life insurance works well if you are completely debt-free and have built up an investment nest egg that generates enough returns to replace your income.
• Corporate Health Plans: Businesses with a large, stable workforce often save money by switching to a self-funded health plan. This avoids insurance company profit margins and state premium taxes, though companies usually buy stop-loss coverage to protect against massive claims.

When Self-Insurance is a Financial Risk

• Catastrophic Essentials: Experts advise against self-insuring for high-risk, high-cost areas like major medical care, home destruction, or liability lawsuits unless you possess a multi-million-dollar net worth.
• The Danger of Ruin: A single house fire, severe accident, or major illness can easily cost hundreds of thousands of dollars—wiping out savings and causing total financial distress.
• Legal and Mortgage Rules: Lenders legally require traditional homeowners insurance if you have a mortgage, and most states mandate auto liability coverage.