Self Insured or Fully Insured Medical plans, What you need to know

“What’s the difference between Fully Insured and Self Insured Medical Plans?”

At some point most companies have to make a decision, do I want a Fully Insured Plan or are we willing to Self Insure the plan ourselves.

Before, we can answer that question we should go over the differences.

Fully Insured Plans:

In a Fully Insured Plan, the employer pays a per employee cost of insurance for every enrolled employee. The Insurance Company is then responsible for providing coverage for those employees, and covering claims.

Most small businesses under 200 employees are “Fully Insured”. This can be the more expensive option, but is often the cleanest. As an employer you have set a “Maximum” cost for benefits, you pay the premium and that’s it.

Self Insured Plans:

In a Self Insured Plan, the employer acts as the insurance company. So, instead of paying a premium to an insurance company, the Employer sets aside the premiums it would have paid and pays the claims directly. The company contracts with a provider to administer the plan, but the claims are the employer’s responsibility.

As companies get larger 200+ they tend to shift more toward Self Insured plans because they have the capital to pay the claims, and a large number of employees to reduce the risk of a large claim. This option can be more cost affordable for businesses but it does involve a larger number of moving parts”.

So, the question arises “What happens if there’s a huge claim on a Self Insured Plan?”

Most businesses purchase “Stop Loss Coverage”.

Stop Loss Coverage, basically picks up any claim above a certain dollar amount.

For Example:

You have Stop Loss Coverage above $100,000 and an insured puts a claim in for $150,000 because of a major procedure.

You would pay the first $100,000 and the Stop Loss would pay the $50,000 above.

This is a great way for businesses to protect themselves from huge claims while still taking advantage of the possible upside of a Self Insured Plan.

The majority of the time, businesses are shocked to see how much they pay in premiums and how little the insurance companies actually pay out in claims. The best way to see what type of plan is right for your company is to contact a Health Insurance Professional and have them review your claims history and premiums.

If you have any questions you can reach me at (631) 338-9917.