Final answer:
Self-insurance is the most sensible approach for a company if covering employee medical expenses directly is more cost-effective than paying for insurance premiums. This method saves on the margin that would otherwise be paid to an insurer and is suitable when healthcare costs are relatively low and manageable.
Step-by-step explanation:
If the financial burden of covering employee medical expenses by the company is less than the cost of subscribing to an insurance company for coverage, the approach that makes the most sense is self-insurance. In this scenario, the company takes on the role of an insurer itself, covering the medical costs of its employees directly. Self-insurance can be cost-efficient when a company has low healthcare costs in comparison to insurance premiums, as it avoids paying a margin to an insurance provider. It's essential, however, for the company to assess its ability to manage risks and have a substantial fund set aside for potential claims. Other options like Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), or Point of Service (POS) plans involve paying premiums to an insurance provider, which may not be cost-effective in situations where a company faces lower healthcare expenditures than the insurance costs.