How is Fully-Insured Different from Self-Funded?

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How is Fully-Insured Different from Self-Funded?
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Fully-insured and self-funded are distinctly
different financial arrangements, and are
suitable for different types of North Carolina
companies. Here are some of the details of
fully-insured plans Risk In a fully-insured
plan, the employer pays a per-employee premium to
an insurance company, and the insurance company
assumes the risk of providing health coverage for
insured events.
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Plan characteristics In fully-insured
arrangements, premiums vary across employers
based on employer size, employee population
characteristics, and health benefit use. Premiums
can also change over time within the same
employer because of changes in the demographics
of the employed group as well as benefits
used. On the other hand, self-funded plans in NC
have different characteristics
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Risk In a self-insured plan, instead of
purchasing health insurance from an insurance
company and paying the insurer a per-employee
premium, the employer acts as its own insurer.
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In the simplest form, the employer funds the
projected claims and fixed costs and has a Third
Party Administrator (TPA) that pays the claims
directly to the providers. The employer bears the
risk associated with offering health benefits.
Plan characteristics In a self-funded
arrangement, there are no premiums to pay other
than the monthly fixed costs for administration
and reinsurance. The employers responsibility is
to fund the actual claims paid that week/month
through the TPA.
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