Which statement regarding self-insured health plans is incorrect?

The statement regarding self-insured health plans that is incorrect is the one suggesting the concept of objective risk leads to the belief that employers with fewer covered lives prefer self-insurance. In reality, larger employers tend to favor self-insurance because they can absorb the financial risk of providing health benefits to employees more effectively than smaller employers. This ability stems from their larger pool of employees, which helps in spreading the risk and minimizing volatility in health care costs.

Employers with fewer covered lives may find self-insurance less appealing because the lower number of participants can lead to greater fluctuations and unpredictability in claims. As a result, small employers typically gravitate toward fully insured plans where the financial risk is borne by the insurance company, thus providing them with more stability in managing health care costs.

In contrast, statements regarding self-insurance being unwise for plans with low credibility, the attractiveness of self-funding to small employers under the Affordable Care Act, and the dominance of self-insurance in the large group health market are all supported by industry trends and data. These dynamics highlight the complexities surrounding employer decisions in choosing between self-insurance and fully funded options based on the size and risk tolerance of the employer.