How is Fully-Insured Different from Self-Funded?
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.
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:
Risk: In a self-insured plan, instead of purchasing health insurance from an insurance company and paying the insurer a peremployee premium, the employer acts as its own insurer.
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 employer’s responsibility is to fund the actual claims paid that week/month through the TPA.
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