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Have you ever thought about changing how your company handles employee insurance coverage? Benefits like healthcare are some of the largest costs faced by businesses today and they’re only growing, with family premiums rising by 52% over the last decade alone.1
But if you have a fully insured plan, you probably don’t have a lot of insight into what’s driving those numbers or how to start bringing them down.
Fortunately, there’s another option out there, one with big potential benefits in terms of flexibility, insight, and savings: self-funding your plan.
So, what’s the difference between the two?
They differ according to who assumes the insurance risk, who determines the plan characteristics, who makes the payments and who is ultimately responsible for compliance governance:
- Fully-insured plan: Employer purchases insurance from an insurance company. The insurance company is then responsible for assuming risk and running the plan.
- Self-funded plan: Employer provides health benefits directly to employees, assuming the financial risk and taking on the responsibility of running the plan.
To help you better understand the differences between self-funded and fully insured, we’ll walk through both healthcare insurance models, looking at how they work, discussing pros and cons, and diving into the details you need to know if you’re thinking about making the switch.
Fully Insured Plans
Fully insured health plans are the traditional model, and the simplest to implement.
Your business pays a fixed premium to an insurance carrier (usually one of the “big four”: BlueCross BlueShield, UnitedHealthcare, Cigna, or Aetna), and in return, the carrier assumes all the financial risk of providing health coverage for insured events. They handle claims and administration, while you focus on paying the premiums, which are based on the number and demographics of the people you’re insuring.
