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Fully-Insured vs. Self-Insured Health Plans

A fully-insured health plan is the more traditional way to structure an employer-sponsored health plan. With a fully-insured health plan:

  • The company pays a premium to the insurance carrier.
  • The premium rates are fixed for a year, based on the number of employees enrolled in the plan each month.
  • The monthly premium only changes during the year if the number of enrolled employees in the plan changes.
  • The insurance carrier collects the premiums and pays the health care claims based on the coverage benefits outlined in the policy purchased.
  • The covered persons (eg: employees and dependents) are responsible to pay any deductible amounts or co-payments required for covered services under the policy.

With a self-funded health plan, employers operate their own health plan rather than purchasing a  plan from an insurance carrier. One reason an employer may choose to self-insure is that it allows them to save the profit margin that an insurance company adds to its premium for a fully-insured plan. However, self-insuring exposes the company to more risk in the event that more claims than expected must be paid. With a self-funded health plan:

  • There are two main costs to consider: fixed costs and variable costs.
  • The fixed costs include administrative fees, any stop-loss premiums, and any other set fees charged per employee. These costs are billed monthly by the TPA or carrier, and are charged based enrollment.
  • The variable costs include payment of health care claims. These costs vary from month to month based on health care use by the members, including employees and dependents.
  • To limit risk, some employers use stop-loss or excess-loss insurance which reimburses the employer for claims that exceed a predetermined level.

Kairos Insurance Group can show you all of your options, including fully-insured and self-funded health plans.  Call us today at 719-637-2500.