The good old fashioned way of getting insurance. Typically the most expensive.2+ Employees
A fully insured plan means that you are passing all of the risk onto your insurance carrier who charges you a flat monthly fee based on how they gauge the risk of insuring your employees.
If covered employees experience health issues and use the plan more, you will probably face a hefty increase in the monthly premium your business pays when your plan renews. Conversely, if your employees rarely use the insurance, you’re stuck playing a flat monthly rate no matter what. This model decreases the risk of month-to-month fluctuations but doesn’t provide any meaningful incentive for having healthy employees.
Ultimate control. Largest potential rewards for a bit more risk.
A self-insured plan is one in which the business pays the actual claims and essentially assumes the role of the insurance carrier in terms of managing risk. Many large companies offer at least one plan that is fully self-insured because they have a large pool of covered employees and also have the cash reserves to protect against a spike in claims volume or amount.
Historically, self-insurance has been perceived as far too risky in the small business market for a number of reasons. Small businesses typically have less cash on hand and can’t weather a dramatic increase in costs as easily. Also, claims data is very hard to come by in small business so it’s difficult to judge if self-insuring is worth the risk because you don’t even know the risk! Most small businesses also lack the manpower in-house to actually review and process claims so they still pay an insurance company to act as a Third Party Administrator (TPA). Though the business is paying the claim, the insurance company will actually process it accordance with the plan documents and ensure that all protocol is followed.
Feels like fully insured with a possible surplus credit at the end fo the year.
The “level” of level funding refers to the fact that you self-insure, but pay a level or steady fee each month as determined by your TPA. Level-funded plans also come fully integrated with individual and aggregate stop-loss insurance. Individual stop-loss insurance will kick in if a covered employee or dependent exceeds a certain dollar amount in claims. An aggregate stop-loss will be activated above a certain dollar amount for all claims. After you pay your level monthly fee for a year, your TPA will compare what you’ve paid for the actual claims and refund you any difference if you’ve paid more than you’ve spent. In summary, you get the regular and predictable cost of a fully insured plan, but because you’re actually self-insured, you only end up paying for the healthcare costs actually incurred by your employees.
Self funding within a group
A captive is a group of like-minded employers who join together and share the advantages of being self-insured without the without the risk & volatility. Your risk is mitigated by joining together with other like-minded employer groups to leverage size and predictability.
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ThinkTank Insurance Partners, Inc.
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