Fully Insured vs Self-Insured: Which Plan Should You Choose?
You know the importance of offering benefits that are a win for both your business and your employees, but it can be tough to find that balance in the marketplace. Understanding the two primary types of employer-sponsored health insurance is a good place to start in making your decision. Weighing the pros and cons of “fully insured” and “self-insured” plans will help you make informed choices – and potentially save your company money.
Fully Insured Plans
Fully insured plans are the traditional approach to providing group health coverage and is typically the go-to solution for most small businesses. With a fully insured plan, the employer chooses healthcare coverage from a list of pre-designed policies offered by a major insurance carrier. Plans that are fully insured must comply with state regulations.
The employer pays a fixed premium to the company each month while the insurance company assumes 100% of the risk. Businesses with a high-risk population or plans to add a lot of new employees may find it easier to budget with the fixed cost that comes with a fully insured plan.
Self-insured or self-funded plans are geared towards employer groups who want to offer health benefits to their employees without paying an insurance company. Instead, they take the place of the insurance company and “self-insure”. In these types of plans, the employer has the flexibility of creating a benefit plan for its employees, but they also accept responsibility for the risk of the enrollees.
The employer does not pay premiums in a self-insured plan, but rather fixed costs such as administrative fees and stop loss premiums. Variable costs like employee health care claims may also be a factor. Self-insured plans are exempt from state law and instead follow Federal laws (ERISA). This sets minimum standards for most voluntarily established plans in a private industry to ensure protection for the individuals who opt into the coverage.
Making the Choice
Now that you know more about the two main types of insurance plans, the next step is to shop around and find the best coverage for your business. If you find yourself wishing someone else could do the work, let the Grigg Group help. Our team listens to your needs, helps you assess your budget, and then works on your behalf to filter through coverage options from multiple insurance companies. Ready to cross healthcare shopping off your list? Contact us today!