What is a Fully Insured Plan?
A fully insured plan is the most common type of health benefits plan offered by employers. This traditional health insurance model relies on a third-party insurance carrier to assume financial risk and pay claims for members in exchange for pre-paid premiums.
Employers pay the annual premium for fully insured agreements, which they negotiate with the carrier at the start of each year. The number of members enrolled in the plan, as well as a spouse or any dependents listed on their plans, are the primary factors that influence premium pricing.
Finally, the total premium for the covered group is calculated by adding all of the premiums together. The total figure represents the amount that the covered organisation must send to the insurance company each month, quarter, half-year, or year, depending on the terms agreed upon. Most employers expect employees to contribute to the cost and typically deduct an amount from each or every other paycheck that the company and each employee agree upon.
Plans can change throughout the year depending on when employees resign or join, affecting the group number and the cost of the plan.Otherwise, the medical claims are paid by the health insurance carrier in accordance with the policy agreement.
What are the responsibilities of the employer and employee under a fully insured health plan model?
In any insurance plan, everyone has their own set of responsibilities. Here are a few things that an employer must do to fulfil their obligations when implementing a fully insured plan:
- Keep track of the number of employees in the plan and make adjustments as employees join or leave the organisation.
- Seek out the best health benefits plans available as opportunities arise to ensure that you get the best premium rates to enjoy and pass on to the employees.
Employees must also perform certain tasks when participating in an employer-sponsored health insurance plan, such as:
- Before signing up for the group policy, they should understand and agree on the plan that is best for them and their families.
- Pay for premiums, whether deducted from paychecks or paid in full, as well as deductibles and co-pays for health services covered by their fully-insured policy.
Benefits of a fully insured plan
- In this model, the rates are more consistent, which means there are fewer cost variances from month to month. Essentially, once the premium is paid, there is nothing to worry about.
- All claims are managed by the insurance provider, which eliminates administrative duties and costs for the company.
- The insurance company assumes all risk, relieving the benefits team of the burden.
- It is dependable and secure for both employers and employees.
- Users benefit from reduced risk because they set a premium price, pay for it, and rely on the carrier to meet their obligations.
Drawbacks of a fully insured health benefit plan
- Convenience frequently comes with a price, which translates to higher premiums for a fully insured plan.
- Every year, employers' human resources departments must re-negotiate with insurers.
- Employers frequently struggle to effectively communicate coverage benefits to employees.
- Employers' tax burdens are frequently higher than in other types of plans.
- Fully insured plans are largely inflexible by design, leaving employers with little leeway to make changes.