Self-Funded vs. Fully-Funded
Fully insured plans are controlled completely by insurance companies. An insurance company at its simplest definition is like a bank. In essence, if the insurance company loses money in a given plan year, they simply raise the rate of your premium. This gives them nearly all control over your insurance budget. Conversely, if the insurance company makes money, at best, they will leave your rate the same and make it sounds like you are getting a deal. In short, in a good year, the insurance company makes money, and you have no rate increase. In a bad year, they pass their losses on to you in a premium increase.
Partially self-funded plans are constructed in such a way that you are your own bank. Your bank is not insured by the FDIC but by reinsurance contracts or carriers (limiting your risk). In a bad year, as with an insurance company, you will be required to increase the funding for your partially self funded plan; however, in a GOOD YEAR, THE PROFITS REMAIN WITH YOU.
WANT MORE CONTROL?
Fully-insured products typically come in “cookie cutter” type formats with little flexibility for the plan sponsor other than deductibles and coinsurances. They have no oversight in the appeals process or when other coverage issues are in question. The insurance company, at its full discretion, interprets your plan and what it means for your employees.
On the other side of the coin, a partially self-funded benefit plan is controlled totally by the employer. The choice of covered services is made by the employer based on the needs of their team members not the universal population of the health trends in all of America. Changes to these benefits plans made be made at any time during the plan's year with proper notification. The employer can strengthen the wellness benefit for example and eliminate other benefits that are in the other fully insured products that may not be needed or wanted for your specific set of circumstances. If an appeal is made by a team member, it is addressed by a third party administrator with plan oversight in conjunction with your insurance management firm. In short, you have total control and flexibility.
WHICH OF THE TWO IS RIGHT FOR YOU AND WHY?
The short answer to this question is that if you have fewer than 100 employees, it is probably not in your best interest to even consider partially self-funded products because the risk is not in your favor. Of course, many other factors come to play in this decision as well; however, RWI Benefits, LLC is an expert at helping you in the guidance of this process from start to finish. Our assessment is free and can be accomplished in approximately five business days with minimal intrusion in your benefit activities.
If you are ready to start saving money and work to improve your plans, please consider us and give us a call today by contacting Terry Harris at 1-888-RWI-GROW.