Difference Between Self-Insured and Fully Insured

Some of the key differences between a self-insured plan and a fully insured plan are – who pays for the members’ claims, who takes up the insurance risk, and who saves in case the claims are less than what was estimated. In a self-insured plan, the employer is responsible for the members’ claims as it assumes the insurance risk and it also saves in case of lower claims. On the other hand, is a fully insured plan, the responsibility of members’ claims as well as the insurance risk is transferred to the insurance carrier, who is benefited in case of lower claims.

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What is Self-Insured?

The self-insured plan is also known as a self-funded plan as the employer is responsible for paying the medical claims and operating the health insurance plans with the help of vendors, who are known as third-party administrators (TPA). Basically, the employer chooses a self-insured health plan as it can result in significant savings on premiums. But it is important to note that a self-insured plan exposes the employer to a major risk in case the claims are much higher than the estimation. However, the employer can limit this risk by purchasing excess-loss or stop-loss insurance, which reimburses for the claims that go beyond a pre-determined level.

Key Takeaways

  • Self-insured plans and fully insured plans differ in terms of who looks after the day-to-day performance of the health insurance plans. While the employer retains all the responsibilities in a self-insured plan, these responsibilities are transferred to the insurance carrier in a fully insured plan.While the self-insured plans offer higher savings on premiums and better flexibility to choose the required benefits, the fully insured plans relieve the financial risk on the employer along with great implementation speed.The self-insured plans are less regulated as compared to the fully insured plans.

What is Fully Insured?

The fully insured plan is the traditional model of insurance where the third-party insurance carrier assumes the financial risk to pay for the members’ claims in exchange for the premiums paid to them. Basically, the employer pays the premium for the given year, which is decided at the start of that year based on the number of members covered in the plan. During a year, the premiums change only when the number of members covered in the plan change. The insurance carrier pays the medical claims as per the covered benefits of the policies in exchange for the premiums received from the employer.

Self Insured vs Fully Insured Infographics

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Comparative Table – Self Insured vs Fully Insured

This has been a guide to the Self Insured vs Fully Insured. Here we discuss the top differences between the two along with infographics. You may also have a look at the following useful articles –

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