A fully insured plan means that you are passing all of the risk onto your insurance carrier who charges you a flat monthly fee based on how they gauge the risk of insuring your employees.

If covered employees experience health issues and use the plan more, you will probably face a hefty increase in the monthly premium your business pays when your plan renews. Conversely, if your employees rarely use the insurance, you’re stuck playing a flat monthly rate no matter what. This model decreases the risk of month-to-month fluctuations but doesn’t provide any meaningful incentive for having healthy employees.

A self-insured plan is one in which the business pays the actual claims and essentially assumes the role of the insurance carrier in terms of managing risk.  If covered employees experience health issues and use the plan, the business pays directly.

Many large companies offer at least one plan that is fully self-insured because they have a large pool of covered employees and also have the cash reserves to protect against a spike in claims volume or amount.  Though the business is paying the claim, the insurance company will actually process it accordance with the plan documents and ensure that all protocol is followed.

The “level” of level funding refers to the fact that you self-insure, but pay a level or steady fee each month as determined by your TPA. Level-funded plans also come fully integrated with individual and aggregate stop-loss insurance. Individual stop-loss insurance will kick in if a covered employee or dependent exceeds a certain dollar amount in claims. An aggregate stop-loss will be activated above a certain dollar amount for all claims. After you pay your level monthly fee for a year, your TPA will compare what you’ve paid for the actual claims and refund you any difference if you’ve paid more than you’ve spent.  Get the predictability of fully insured and the savings of self insured.