Group health insurance is a health insurance plan offered by an employer. Members of a group health insurance plan usually receive coverage at a lower cost because the employer is sponsoring a share of the premium’s costs, and the insurance carriers are diversifying risk among larger pools of companies and their employees.
For Employers, having a well-designed and competitive group medical plan offers better recruitment and retention. For employees, it provides security by having easy access to quality health insurance coverage that is usually cheaper for them than if they purchased individual health insurance. Group health insurance plans also provide tax benefits to both the employer and employee. The money employers pay towards monthly premiums is tax-deductible, and employees’ premium payments can be made pre-tax, which may reduce their total taxable income.
The right group health insurance plan design is critical, both in terms of cost and in staying competitive in the rapidly evolving labor marketplace. The healthcare industry continues to change with new legislation and insurance carrier mergers and acquisitions. Our benefits experts work with you and your organization to design and implement a cost-competitive group health insurance plan solution that’s attractive to your employees.
Fully Insured And Self Insured (Self Funded) Plans
Fully Insured and Self Insured (Self-Funded), are two common ways you can structure your group health insurance plan.
- Fully Insured plans: A more traditional group health insurance plan where the insurance company, not the employer, sponsors the fully funded plan and holds the insurance policy. The company pays a fixed monthly premium to the insurance carrier to pay the employee claims and administer the benefits.
- Self-funded plans: An insurance arrangement in which the employer assumes direct financial responsibility for the costs of enrollees’ medical claims. Employers sponsoring self-funded plans typically contract with a third-party administrator or insurer to provide administrative services for the self-funded plan. Usually, the employer also buys stop-loss coverage from an insurer to protect the employer against very large claims.
Smaller employers that may be interested in a self-funded plan may find it hard to plan for their healthcare costs and having more than expected claims or “catastrophic” claims can throw off healthcare budgets or be devastating to a smaller or mid-size business, leaving them scrambling to come up with the difference. But, within self-funded insurance, there are level-funded plans, an option that removes most of these cons.
- Level-funded plan: A level-funded plan is a type of self-insurance that includes monthly cash flow stabilization. That means you pay for the health insurance you use (like all self-insurance plans). But with level-funding, you have a cap on costs. It’s also known as “level-funding” or a “partially self-funded” plan.
As an employer with a level-funded plan, you’ll pay a fixed monthly amount for each employee’s benefits. If claims end up being low, you’ll get money back, often as a rebate or a credit towards the next year’s policy. If claims are high and go over a predetermined level (or cap), then your carrier’s stop-loss insurance kicks in to cover the excessive costs. Your payments are “level.”
As a result, employers with level-funded plans have peace of mind they’ll avoid unexpected high fees and can more accurately predict their healthcare budgets.