What is a fully insured plan?
Under an insured health benefit plan, an insurance company assumes the financial and legal risk of loss in exchange for a fixed premium paid to the carrier by the employer.
The insurance carrier collects the premiums and pays the health care claims based on the coverage benefits outlined in the policy purchased. The covered persons (that is, employees and dependents) are responsible to pay any deductible amounts or co-payments required for covered services under the policy.
What’s my premium amount?
The risk an insurance company takes with an insured plan can be translated into a dollar amount for the employer. That dollar amount is the premium an employer pays each month for the insured group medical benefits. The premium amount includes the following:
- Current and predicted claims cost
- Administrative fee
- Premium tax paid to the state
Advantages of fully insured plans
Assumption of risk
The insurance company assumes the risk. If a large claim occurs, the employer does not incur additional cost.
Reduced administrative costs
Employers with fully insured plans do not pay to outsource plan administration to a TPA or the cost of paying claims.
Other group health insurance plans
Sometimes called partially-funded, the employer pays a set amount each month. At the end of the year, if the total paid out in claims is greater than the employer’s contribution, the insurance company covers the difference.
Employers retain the risk of paying for their employees’ health care claims themselves, either from a trust or directly from corporate funds. Stop-loss insurance helps limit your exposure in the event of a catastrophic claim.