Suppose an electron is bound to a nucleus, leading to an overall charge density $$ \rho(x) = Ze\delta(x) - e \left|\psi(x) \right|^2. $$ If I interpret this charge density just as I would in the context of classical electrostatics, I could easily calculate the electric field arising from it. I routinely think about such an electric field, especially in chemistry, where I often informally consider the electron orbitals to be interacting with each other via Coulomb repulsion. This electric field contains an energy given by $$ U = \frac{1}{8\pi} \int \left| \vec{E(x)} \right|^2 d^3x. $$ Using Gauss' Law, this energy can be rewritten in terms of the charge density that gives rise to it as $$ U = \frac{1}{2}\int \frac{\rho(x_1)\rho(x_2)}{|x_{1}-x_{2}|} d^3x_1 d^3x_2. $$ Substituting my expression for $\rho(x)$ gives three terms: $$ U = \frac{(Ze)^2}{2} \int \frac{\delta(x_1)\delta(x_2)}{|x_{1}-x_{2}|} d^3x_1 d^3x_2 \\ - Ze^2 \int \frac{|\psi(x)|^2}{|x|} d^3x \\ + \frac{e^2}{2} \int \frac{|\psi(x_1)|^2|\psi(x_2)|^2}{|x_{1}-x_{2}|} d^3x_1 d^3x_2. $$ The first and second terms are totally understandable. The first is the electrostatic self-energy of the nucleus. If one remembers that the charge density of a nucleus is not actually a delta function, but rather some distribution with a length scale on the order of the nuclear radius, it can be understood to have a finite value that gives an upper bound on, for example, the energy released in some process like nuclear fission. Because the nuclear radius typically doesn't change in processes I am interested in, I regard this as a constant and ignore it.
The second term just gives the Coulomb attraction between the nucleus and electron. This is the term routinely used in the Hamiltonian to calculate e.g. the energy of a hydrogen-like atom.
The third term I have little understanding of. The only length scale in the integrand is the Bohr radius $a$, and so the third term will be on the order of $\frac{e^2}{a}$, which is on the order of the binding energy of the nucleus and electron. The fine-structure constant doesn't appear, and so this cannot be regarded as a self-energy interaction stemming from some QED correction (I am treating the electric field classically anyway, so that's expected).
So what is it? Does it have any physical significance, and why is it ignored when one usually calculates the energy of a hydrogen-like atom? This term should increase the atomic radius and cause the electronic charge density to 'repel itself'. I think my result is incorrect and the third term should be absent, but I am not sure what assumption is wrong.