Group Medical Insurance

Fully Insured Group Medical Plans

Fully insured refers to an insurance arrangement where an individual or entity, typically an employer, pays a fixed premium to an insurance company. The insurer assumes the full financial risk and responsibility for paying all covered claims and handling all administrative duties.

This is the traditional insurance model and the primary alternative to self insured or self funded plans where the employer takes on the financial risk of paying employee claims directly.

Key Characteristics of Fully Insured Plans

• Predictable costs: Fixed monthly or annual premium costs are known in advance to help with budgeting.
• Risk transfer: The insurance carrier assumes the financial risk of high or unexpected claims.
• Administrative simplicity: The carrier handles claims processing, customer service, and regulatory compliance.
• Regulation: Fully insured plans are generally subject to state insurance regulations and mandated benefits.

Fully Insured Carrier Options

• CareFirst BCBS
• United Healthcare
• Aetna
• Cigna
• Kaiser
• Pennsylvania – Geisinger
• Virginia – Anthem

Level Funded Group Medical Plans

Level funding combines the cost control features of self funding with the stability of fully insured plans. Employers pay a consistent monthly fee that covers anticipated claims, administrative expenses, and stop loss insurance.

Level funded refers to a type of self insured health plan where an employer makes steady monthly payments to cover administrative costs, expected claims, and stop loss coverage. If actual claims are lower than expected, the employer may receive a refund for the unused portion.

Why Employers Consider Level Funded Plans

• Predictability: Fixed monthly payments make budgeting easier.
• Customization: Plans can be tailored to employee needs.
• Cost savings: Potential savings and refunds if claims are lower than expected.
• Flexibility and transparency: Greater control and insight into healthcare costs.
• Protection: Stop loss insurance helps mitigate large claim risk.
• Transitional step: A useful bridge from fully insured to self funded arrangements.

How Level Funded Plans Work

• Fixed monthly payments: Employers pay a set amount that covers three components:
  • Claims fund: Money set aside for expected claims.
  • Stop loss insurance: Protection for claims that exceed expected amounts.
  • Administrative fees: Costs for plan management and customer service.
• Risk and reward: If claims are lower than estimated, the employer may receive a refund. If claims are higher, stop loss coverage pays the excess.

Level Funded Carrier Options

• Trustmark
• United Healthcare
• CareFirst
• Virginia – Anthem

Self Funded Group Medical Plans

To be self insured means an organization sets aside its own money to pay for potential future losses instead of paying premiums to an insurance company. The entity retains the financial risk of losses such as medical claims and uses the reserved funds to cover them directly.

Employers often use self funding for employee health benefits, while individuals may use a similar approach by choosing high deductibles on traditional policies.

How Self Funded Plans Work

• Risk retention: The employer or entity takes on the financial risk of potential losses instead of transferring it to a carrier.
• Fund creation: Money is set aside in a reserve fund to cover future claims.
• Direct payment: When claims occur, the entity pays costs directly from its own funds.
• Administrative support: Many organizations use a third party administrator to handle claims, networks, and day to day administration while the employer retains the financial risk.

Self Funded vs Fully Insured

Feature	Self Insured	Fully Insured
Risk	The organization or individual assumes the risk.	The insurance company assumes the risk.
Payments	Funds are set aside and claims are paid directly from the organization's assets.	A fixed premium is paid to the carrier, which then pays claims.
Cost control	Greater flexibility in plan design and potential cost savings.	Less flexibility. Costs and plan design are largely determined by the carrier.
Oversight	The organization manages claims and compliance, often with a third party administrator.	The carrier manages claims and compliance.