There are three types of group health plans that most employers use: self-funded, level-funded, and fully-insured. Though the names may sound self-explanatory, do you truly understand all there is to know about each type? In this blog, we’ll get down into the nitty-gritty details of fully-insured insurance.
What is fully-insured insurance?
With a fully-insured insurance plan, the employer pays a premium to an insurance carrier in exchange for the carrier taking care of the employee claims. The premium can vary based on the size of the company, the relative health of the employees, and the frequency the healthcare options are used.
Let's see a concrete example.
Why buy fully-insured insurance?
Common reasons in going with a fully-funded policy include:
- Consistency: The premium paid to the insurance carrier tends to be stable. You may find your cost variances month to month to be more stable.
- Time Management: The claims incurred are managed by the insurance carrier, so you would have more time on your hands for other matters. You wouldn’t have to have the hassle of dealing with claims. This also makes the plan faster to implement.
- Confidence: You know your claims will be taken care of by a trustworthy and expert source. Your premiums will not fluctuate during the plan period, and you can rest easy knowing claims are being dealt with.
Are there any cons to a fully-insured plan?
There are pros and cons to every plan. With a fully-insured plan, here are common reasons many don’t purchase one:
- Negotiation: You have to either accept the community rate at face value or spend time negotiating a deal.
- Cost: Like we mentioned before, premiums are determined by the size of the company, the relative health of the employees, and the frequency with which healthcare is needed. The higher your loss ratio (claims cost divided by remounts collected), the higher your premium may be.
- Taxes: You are subject to state and federal taxes.
- Flexibility: It is harder to customize your plan to your employees’ needs.
So, should I go with a fully-insured insurance plan?
Finding the best policy for your needs is up to you. It could be fully-insured, yes, or it could be level-funded or self-funded. Our advice is to do your research, take stock of your company, and see what plan you think makes the most sense. Think about pricing and how the cost of fully-insured insurance is decided, and if you want your claims to be managed.
I still have questions. What should I do?
You can also contact us! We’ll get you the right information to help you on your insurance journey.