Which funding arrangement involves an employer covering only normal claims up to a certain threshold?

The correct answer is the minimum premium arrangement. In this type of funding arrangement, the employer agrees to cover the usual claims up to a specified limit, and then a higher level of coverage kicks in once that threshold is surpassed. This means the employer retains some of the risk for smaller claims, allowing for lower premiums overall, as the insurer would only take on the risk for claims that exceed this predetermined amount.

This arrangement can be particularly beneficial for employers who want to manage their costs while still protecting themselves against larger, unexpected claims. By covering normal, smaller claims up to a certain level, the employer can often achieve significant savings on premiums since they are not paying for the insurance coverage for the minor claims they are willing to absorb themselves.