Fully-Insured Health Plan

A fully-insured health plan is the traditional arrangement: the employer pays a fixed premium to an insurance carrier every month, and the carrier pays the claims, takes the risk, and keeps whatever is left. If claims come in low, the carrier keeps the surplus. If claims come in high, the carrier absorbs the loss, at least until renewal.

The trade for that predictability is price. Premiums include the carrier's risk charge, state premium tax of 1 to 3 percent, and the carrier's margin, and the carrier sets next year's rate with the claims history in hand. I spent years delivering renewals, and a 12 to 18 percent increase after one bad claims year was normal, with no way for the employer to see which claims drove it. Fully-insured plans also follow state benefit mandates, which can be good for members and expensive for the group. Most employers under 50 lives are fully-insured because carriers won't write self-funded contracts that small; level-funded plans emerged to give those groups a middle path.

The takeaway: a fully-insured employer still has leverage. The claims are still your employees' claims, and steering them to lower-cost, high-quality care shows up at renewal. Ask your carrier for the large-claim report and the utilization summary every year; you're entitled to them.