The 3 Main Differences Between Fully-Insured and Self-Funded Plans

I'm Mike Krupa. And today I'm gonna teach employers about the main differences between being fully insured and self-funded to keep it simple. I'm going to break it down into three main categories. The first is risk, so in a fully insured environment The carrier ultimately holds the risk in a given year. And that means whether claims are good or bad. They're taking that on and the employer pays the same amount every month in a self-funded environment. The employer is taking on the majority of the risk, and they are now paying for claims as they come in and if those claims are good, they pay less and if those claims are not as good they pay a little bit more second category is plan architecture. So in a fully insured environment the insurance company or the carrier ultimately controls the entire plan architecture that one insurance carrier is the same for medical claims for prescription drug claims. They are handling the customer service. They even dictate what the designs of the plan are. And in a self-funded environment the employer controls the plan architecture, which means they can still have everything be one carrier, but they now have the ultimate control to include multiple parties, maybe somebody different for prescription drugs and for medical in addition. They also control the plan designs. So Employers in a self-funded environment set their own deductibles co-pays and out-of-pocket maximums. The third category is payment structure in a fully insured environment. There's a flat monthly premium that only fluctuates based on head count or family size, but in a self-funded environment, there's three main components first is Administrative fixed costs. The second is stop loss think of this like a fully insured policy for large claims. Both of those are fixed amounts every month, but then the third one which is the biggest component of self funding is the claims and the claims are typically paid on a weekly. By employers and this is the variable amount. There's a lot more to cover than just this so stay tuned in the following weeks for more.