Fully Insured vs. Self-Funded Health Insurance Plans
In the world of employee benefit plans, there are two types of health insurance plans – fully insured and self-funded/level funded. Both plans offer similar benefits to employees but differ in how they are administered and funded. Understanding the differences between these two types of plans is essential in order to ensure that your company is providing the best possible coverage for your employees.
Fully insured plans are those that are purchased from a third-party insurer and are typically the most common type of plan. With a fully insured plan, the employer pays a fixed premium to the insurer in exchange for the coverage they receive. The insurer then assumes the responsibility of paying claims and managing the plan.
Level funded plans, on the other hand, are funded and administered by the employer. With this type of plan, the employer pays a fixed cost each month that is based on their employees’ expected medical costs. The employer then takes on the responsibility of managing the plan and paying claims.
The key difference between fully insured and level funded plans is that with a level funded plan, the employer is able to save money if their employees’ medical costs come in under the expected amount.
It’s important to understand the differences between fully insured and level funded plans in order to choose the best plan for your company. While both plans offer similar benefits, the way they are funded and administered can have a big impact on the bottom line. Understanding the differences can help ensure that their company is getting the best coverage for their employees at the lowest possible cost.
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