As an employer, choosing the right health insurance plan for your employees can seem challenging. There are typically two different options: a fully insured plan vs. a self-funded plan.
Each plan has different pros and cons. Taking stock of your priorities is a good place to start. Consider:
- Company size
- Health needs
- Budget
- Risk
- Employee experience
Once you have a good idea of what you can afford and what you’d like to cover for your employees, it’s time to choose your approach.
WHAT IS A FULLY INSURED HEALTH PLAN?
A fully insured health plan is what most people picture when they think of health insurance. The employer pays a premium to an insurance company. In return, the insurance company provides health coverage for insured events. Costs for the employer are more predictable than with a self-funded plan, reducing risk in uncertain times.
WHAT IS SELF-FUNDED HEALTH INSURANCE?
A self-funded (or self-insured) health plan is when the employer acts as its own insurer. The employer assumes most or all costs of benefit claims. In most cases, employers usually contract with an another company to administer their self-funded plan. This “third-party administrator” (TPA) manages certain functions, such as processing medical claims and facilitating enrollment.
| Fully Insured | Self-Funded |
Administration | The insurance company typically handles administrative tasks. | Employers can manage the plan themselves, or they can hire a TPA. |
Responsibility to Pay | The insurance company pays the medical claims (according to the policy terms). The employer pays a fixed premium. | The employer uses a dedicated fund to pay for medical claims. |
Plan Design | Plans are standardized, with less potential for customization. | Employers have more options for customizing plans to meet their company’s unique needs. |
Savings Opportunities | Typically, none. The savings stay with the insurer if claims are low in a given year. | If the total cost of claim payments is lower than the premium costs set aside each month of the year, then the employer can typically pocket the savings. However, the savings may be split between the TPA and the employer, depending on their contract. |
Financial Risk | Minimal. The employer only pays a monthly insurance premium. | Moderate to high. The employer pays for employee medical claims. Additional costs can include a TPA and stop-loss insurance. |
Governance | Plans are subject to federal, state, and local coverage requirements. | Plans are subject to federal regulations. However, they are generally exempt from state and local mandates and regulations. |
Employers who choose to self-fund typically pay for a stop-loss insurance policy. This policy covers larger-than-expected healthcare costs and catastrophic claims.
Self-funded plans offer several potential benefits, including cost savings and the potential for a more customizable plan structure.
FIND THE FUNDING MODEL THAT WORKS FOR YOU
Select Health offers fully insured and self-funded plan options. We also have hybrid funding options, such as contingent funding, to better align with employers’ risk tolerance.
Our sales reps work closely with you to understand your company’s financial priorities and employee needs to provide opportunities for cost savings.
Call our sales team at 801-442-5320 today to see how Select Health can help you find the right insurance plan for your company.