What is the difference between a Fully-Funded Health Plan and a Self-Funded Health Plan?
A fully-funded health plan is one where the insurance carrier assumes all the risk in exchange for a monthly premium. They will pay all claims on the plan, and service the plan’s administration. A self-funded plan requires the employer to assume all the risk, paying all claims on the plan, and will often partner with a PPO to provide healthcare services for the plan. They will also hire a third-party vendor TPA to service the plan’s administration. In other words, the employer becomes the insurer.
The main advantage of a fully-funded plan is the employer knows exactly what the plan is going to cost them. With a self-funded plan, employers benefit from a significant savings in the overall cost of their benefit programs. Additionally, employers have more control over the benefits that the plan offers.
The downside of a fully-funded health plan is when benefits go unused, the employer does not get any money back. The downside of a self-funded health plan is the employer runs the risk of a large catastrophic claim and must purchase stop-loss insurance to protect themselves in such an event. Even with the additional expense of stop-loss insurance, employers save a significant amount of money on premiums and other advantages.
Partially-Funded Plans (aka Level-Funded) are a variation of a Self-Funding and allows small employers to take advantage of all the cost saving and benefit design features of a fully self-insured plan, however, they share the risk with one of our top national carriers. The premiums for shared funding plans are generally much lower than fully insured plans. An employer may save even more by implementing wellness programs into the benefit strategy.
Following are Group Health Plan Options
A Health Maintenance Organization (HMO)
An HMO group health plan requires employees to appoint a primary care physician who directs treatment utilizing service providers affiliated with the HMO. HMOs offer access to a comprehensive package of health care for a low monthly premium. A small co-payment is often required for services, depending upon the type provided.
Preferred Provider Organization
PPO group health plans offer a vast network of quality healthcare providers and facilities. Employees save the most money on healthcare if they use providers within the network, as some services may be only partially covered or not even covered at all when outside providers are used. Also, many services may not be covered if deductibles are not first met, however, the plan includes important wellness and preventative services provided outside of the deductible with a small co-pay.
Point of Service Plans (POS)
POS plans combine features of HMOs and PPOs. Most POS plans require members to choose a primary care physician from within the POS network, but allow them to use out-of-network specialists with a referral from a primary care physician. Co-payments will be higher for out-of-network services.
