fully insured plans

Fully Insured Plans: The Good, The Bad, and The Hilarious

Find the benefits and drawbacks of fully insured plans and realize why your well-being depends on having one.

When I first started in employee benefits ten years ago, I felt I understood healthcare really well.

But I soon discovered that, full of problems and humorous events, fully insured plans would become my expertise.

Early in my work, I had to explain a fully insured plan to dubious staff members of a computer company.

Their former broker had confused them.

To get ready, I studied everything I could—government records and went to seminars—gassing pertinent information.

My breakthrough was connecting these difficult concepts to daily life, therefore guiding the staff toward clarity.

They picked their rates fast and even chuckled at the peculiarities of insurance plans, such as unclear network maps.

That day I realized my calling in life.

I have worked with other fully insured plans since then, each with unique characteristics.

This encounter has given me the expertise and humorous yet instructive stories to enable others to grasp these ideas.

My straightforward aim is to make completely insured health insurance clear and fun.

Let’s dive in.

What is a Fully Insured Health Plan?

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Under a fully insured health plan, an employer pays a set premium to an insurance company to cover employee medical needs. The insurance company bears the risk of giving the insured members medical benefits in return. Consequently, the insurance company—not the employer—is in charge of handling claims.

Key Features of Fully Insured Plans

  • Predictable Costs– Employers pay a set premium, therefore simplifying budgeting.
  • Risk Transfer– Assumed by the insurance company is the financial risk.
  • Compliance– The insurance company manages legal obligations.
  • Network Access– Usually, these schemes include already-existing networks of medical professionals.

The Good

1) Predictability and Budgeting

Predictability of fully insured policies is one of its main benefits. Companies know just how much they should spend monthly for premiums. This simplifies budgets and helps to prevent any unanticipated expenses.

One colleague I know once chose a self-insured plan without fully appreciating the possible financial volatility. Later on, one especially poor flu season, he was trying to pay for unanticipated costs. Lesson learned: predictability can be precious.

2) Risk Transfer

With a fully insured plan, the insurance provider takes on the financial risk. This means that if there are excessive claims in a particular year, it’s the insurer’s responsibility, not the employer’s. This can give great mental comfort.

3) Compliance and Regulatory Handling

Insurance firms save businesses from the complications of negotiating healthcare laws by handling all compliance and legal obligations.

4) Established Networks

Many times, fully insured health plans include already-existing networks of doctors, hospitals, and specialists. This guarantees that employees have access to a wide range of healthcare services.

The Bad

1) Higher Costs

Fully insured policies tend to be more expensive than self-insured plans. The insurance firm bills a premium covering administrative costs and profit margins in addition to predicted claims.

A friend of mine running a small company discovered that fully insured policies were far more costly than she had expected. She started looking at other choices after reluctantly paying the premiums for a year.

2) Lack of Flexibility

Less freedom is provided by fully insured plans than by self-insured ones. Companies have little power to alter the scheme to fit particular staff requirements.

3) Potential for Limited Provider Networks

Although many fully insured plans provide large networks, some may restrict access to specific providers or call for more out-of-pocket expenses for out-of-network treatment.

The Hilarious

1) Overwhelming Jargon

Negotiating health insurance language is a fight in and of itself. Your brain will spin over words like “coinsurance,” “deductibles,” and “out-of-pocket maximums.”

I once tried to grasp the concept of “actuarial value” all afternoon. I still wasn’t sure exactly what it meant after reading for hours and a few phone calls to the insurance provider. You sometimes have to giggle at the complexity of it all.

2) Unexpected Surprises

Surprises might strike even with a fully covered plan. Received a bill for a service you believed to be covered? More often than you would believe is happening.

One of my colleagues once received a bill for an amazing $500 for a basic blood test. Actually, the lab was outside of the network. The moral of the tale is to find out whether a provider is in-network before booking appointments.

Comparing Fully Insured vs. Self-Insured Plans

Let us now contrast fully insured plans with self-insured ones once we have discussed the fundamentals of each.

Self-Insured Plans

Under a self-insured (or self-funded) plan, the company bears the financial risk of offering staff members medical coverage. The corporation pays for claims out-of-pocket as they develop, not a set premium to an insurance carrier.

Key Features of Self-Insured Plans

  • Cost Savings – Potential for lower costs if claims are lower than expected.
  • Flexibility – Greater ability to customize the plan.
  • Risk – Employer assumes the financial risk.
  • Complexity – Higher administrative burden and regulatory requirements.

Self-Insured vs. Fully Insured: Pros and Cons

Pros of Fully Insured Plans

  • Predictable costs
  • Risk transfer to the insurance company
  • Simplified compliance
  • Established provider networks

Cons of Fully Insured Plans

  • Higher costs
  • Less flexibility
  • Potential for limited provider networks

Pros of Self-Insured Plans

  • Potential cost savings
  • Greater flexibility
  • Control over plan design

Cons of Self-Insured Plans

  • Financial risk
  • Higher administrative burden
  • Complexity in compliance


Understanding the coverage each fully insured and self-insured plan offers is absolutely essential when deciding between them.

Fully Insured Coverage

Fully insured plans typically cover a broad range of healthcare services, including:

  • Medical – Doctor visits, hospital stays, surgeries, preventive care, etc.
  • Dental – Routine cleanings, fillings, X-rays, etc.
  • Vision – Eye exams, glasses, contact lenses, etc.
  • Prescription Drugs – Medications prescribed by healthcare providers.

Self-Insured Coverage

Although self-insured plans can be tailored to pay for a similar spectrum of services, the degree of coverage will rely on the choices made by the company.

One acquaintance in HR once mentioned that their self-insured plan had an odd benefit—covering fitness tracker devices. Although it was a nice benefit, it also made clear how flexible companies are in creating self-insured programs.

Cost Factors to Think About

Choosing between fully insured and self-insured plans usually depends mostly on cost.

Fully Insured Plan Costs

Under fully insured plans, you pay set premiums to the insurance carrier. These rates contain:

  • Expected Claims Cost – The anticipated cost of healthcare claims.
  • Administrative Fees – Costs associated with managing the plan.
  • Profit Margin – The insurance company’s profit.

Self-Insured Plan Costs

Usually, self-insured policies call for:

  • Actual Claims Cost – The cost of healthcare claims as they develop.
  • Stop-Loss Insurance – Optional insurance that limits the employer’s financial exposure.
  • Administrative Costs – Costs related to managing the plan, either internally or through a third-party administrator (TPA).

Finding Providers

One should take into account the network of healthcare providers connected with a fully insured plan while choosing one. Known networks can guarantee workers have access to high-quality treatment.

I formerly had a fully insured plan that let me only access a somewhat small network. Seeking a specialist was like looking for a needle in a haystack. I discovered the hard way that before committing to a plan, one should always examine the provider network.

Employer Benefits

Fully insured plans can be attractive to employers for several reasons:

  • Simplified Administration– Insurance firms handle most administrative chores.
  • Employee Satisfaction– Providing thorough health benefits would help to raise staff retention and morale.
  • Compliance Assurance– Insurance companies guarantee the strategy follows rules.

Legal and Compliance Considerations

Complicated healthcare rules can lead to hefty fines for non-compliance. Since the insurance company handles most compliance issues, fully insured plans free businesses of most liability.

Benefits Analysis

When evaluating fully insured plans, it’s important to analyze the specific benefits offered.

Types of Benefits

  • Preventive Care – Annual check-ups, screenings, vaccines.
  • Emergency Services – ER visits, ambulance services.
  • Chronic Disease Management – Treatment and management of chronic conditions.
  • Mental Health Services – Counseling, therapy, psychiatric care.

One fully insured plan I had offered outstanding mental health benefits. It was a game-changer during a particularly stressful period at work. Having access to quality mental health services can make a significant difference in overall well-being.

Network Access

The healthcare provider network associated with a fully insured plan can greatly impact the quality of care received.

In-Network vs. Out-of-Network

  • In-Network – Providers who have agreed to discounted rates with the insurance company.
  • Out-of-Network – Providers who have not agreed to discounted rates, often resulting in higher out-of-pocket costs for patients.

I vividly remember needing a specialist for a nagging back issue. I found a great one—only to discover he was out-of-network. The resulting bill was eye-watering. It taught me a crucial lesson: always double-check if your preferred providers are in-network before making an appointment.

Customer Feedback and Experiences

Customer reviews and experiences provide valuable insights into what to expect from fully insured plans.

One colleague shared a horror story about a fully insured plan with abysmal customer service. They found themselves trapped in a bureaucratic maze while trying to get a claim processed. Their experience underscored the importance of choosing a plan with a good reputation for customer service.

Educational Resources

For those looking to learn more about fully insured plans, there are numerous educational resources available.

Industry blogs and forums proved to be rich veins of information as I navigated fully insured plans. Real people sharing real experiences brought a depth of understanding not always found in official resources.

Final Thoughts

From my research and experience, fully insured plans are ideal for companies seeking simplicity and compliance. They offer structured, hassle-free solutions with predictable costs and established provider networks. To ensure comprehensive coverage and high satisfaction for both employers and employees, it is crucial to evaluate network access, customer reviews, and specific benefits.

Frequently Asked Questions (FAQs)

1) What is a fully funded plan?

Fully funded plans, also known as fully insured plans, involve an employer paying set premiums to an insurance carrier, which then assumes the risk of providing healthcare coverage.

2) How does ASO differ from fully insured?

Administrative Services Only (ASO) plans are self-insured arrangements where an insurance company handles administrative tasks while the employer covers claims. In contrast, fully insured plans involve the insurer handling both administrative tasks and risk.

3) How is level funding different from fully insured?

Level funded plans combine elements of both fully insured and self-insured plans. Employers pay a set monthly fee covering administrative costs and expected claims. If claims are lower than anticipated, the employer may receive a refund. Fully insured plans do not offer this refund possibility.

4) What are fully insured plans?

Fully insured plans are health insurance arrangements where an employer pays set premiums to an insurance company, which then assumes the risk and responsibility of paying claims.

5) Do most companies use fully insured or self-insured plans?

Larger companies often choose self-insured plans due to potential cost savings and flexibility. Smaller companies typically opt for fully insured plans for the predictability and reduced financial risk.

6) What is the difference between fully insured and currently insured?

“Currently insured” generally refers to someone who has active health insurance coverage, regardless of plan type. “Fully insured” specifically refers to a plan where an insurance company bears the financial risk.

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