What’s the difference between fully insured and partially self-funded group plans?
Over the last three weeks we have been doing a video series on group health insurance plans. The first week we covered when it makes sense to get into a group plan. Last week we covered fully insured group plans. Clink the link to see our video from this week, “What’s the difference between fully insured and partially self-funded?”.
Last week we gave a breakdown of how a fully insured group plans works. This week we took on how a partially self-funded plan works. As mentioned in our last article there are different ways that group plans can function. One of these common ways is partially self-funded.
The best place to start when describing partially self-funded group plans is the underwriting. In contrast to a fully funded insurance plan, partially self-funded group plans do require much more underwriting. In fully insured group plans everyone will receive coverage no matter what. The only thing that can affect the rate is the age and number of employees. With partially self-funded group plans the underwriting department takes a look at the applicant’s health history. For example, if a group is looking at getting into a plan that is partially self-funded and the employees have a history of cancer this will affect the rate or could lead into denying the company coverage.
Employers and businesses owners begin to see the advantage of working with a broker that has access to plans like this. There are other considerations to take into account when looking at partially self-funded group plans. If you have a younger group and/or a fairly healthy group we typically see this option making sense.
How do the plan benefits work on a partially self-funded group plan?
The benefits of partially self-funded groups are similar to that of a fully insured group. This is sometimes referred to as the “front end” of a policy. While working with a broker at Apollo Insurance Group you will have the flexibility to adjust the benefits to what you desire. Keep in mind that benefits and cost are the two main priorities when selecting a policy. With this in mind it only makes sense to have a broker on your team guiding you through the hundreds of policies to pick the perfect one for you and your business. At Apollo Insurance Group we have access to all group plans on the market.
The back end of a partially-self funded group plan
The back end of the policy is typically only seen by the employer. With a fully insured group plans, the employer pays the premium and that is the last they see of it. This concept can be described like a black hole. You throw your premium into a black hole and you don’t know where it goes. With a partially self-funded group plans the employer receives a report with exactly where their premium dollars go. The employer will know exactly how much goes to administrative cost, stop-loss premium, and the claims fund. Many employers obviously view this as a benefit being able to tell where their hard earned money is going.
Along with choosing to have a self-funded group plan there are different ways to structure the policy. One of these ways is level funding. Level funding brings advantages to an employer. In a level funded group plan if the amount of premium paid exceeds the amount of claims by the group the employer will receive a check at the end of the year for the difference. This is different from a "use it or lose it" structure of fully insured plans. Another advantage of the level funded plans is the utilization reports that the employer receives on the use of the plan. This can show unnecessary usage of the policy and get a better idea of how the company uses their health insurance. That way the following year they can change their plan and hopefully save some money by changing the benefits to fit how they use their insurance plan.
Insuring Against Deductible
An option in self-insured groups that is less used is insuring against the deductible. In this plan structure an employer weighs the options presented by a broker. If an insurance company is offering a plan that cost the company $6,000 a year per employee with a $1,000 deductible the owner can decide to insure against the deductible.
Here is a practical example of how this works. To make numbers simple, let's say it costs the employer $6,000 per employee to insure them with a $1,000 deductible. The employer decides that he would rather pay less for the insurance and give the employee an HRA (similar to HSA) cover the difference in deductibles. Therefore the employer buys a plan that costs $2,000 per employee giving the employee a $4,000 deductible. The owner then funds an HRA for the employee with $3,000. Therefore if the employee ever is hospitalized or needs surgery their out-of pocket will be $1,000 just like the original plan was set up like. This plan structure resemble the same structure that had a $1,000 deductible but saved the employer $1,000 per employee.
You can see how quickly this could add up. This option is appealing to groups who are healthy and don't hit their deductible. This structure is a win-win for the employer and the employees.
Apollo Knows Best!
Contact us today to talk about which type of group plan fits you and your companies needs. We can typically save businesses around 15-20% on their health insurance premium. Call us today for your free health insurance quote!