The premium rates are fixed for a year and dependent on the number of employees enrolled in the plan each month. The company pays a premium to the insurance carrier. What is a Fully-Insured Health Plan?Ī fully-insured health plan is considered the traditional way to structure an employer-sponsored health plan. This coverage can be purchased to cover catastrophic claims on one covered employee or to cover claims that greatly exceeded the expected level for the group of covered employees (aggregate coverage). In order to mitigate risks, some employers use stop-loss or excess-loss insurance which reimburses the employer for claims that exceed a predetermined level. These costs vary from month to month based on health care use by the covered employees. The variable costs include the actual cost of health care claims. These costs are billed monthly by the TPA or carrier, and are charged based on plan enrollment. The fixed costs include administrative expenses, any stop-loss premiums, and any other set fees charged per employee. The two main cost to consider in a self-insured health plan are fixed costs and variable costs. However, self-funding exposes the company to greater risk if the amount of claims are more than expected. With a self-funded (self-insured) health plan, employers operate their own health plan as opposed to purchasing a fully-insured plan from an insurance carrier.Įmployers opt to self-insure because it allows them to save money if claims are at or below the expected level.
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