Fully insured health plans are typically group health insurance plans in which an employer or company pays the health insurance premiums for coverage. Insurance companies that provide the group health insurance plan for an employer set the premium rates each year. Fully insured plans have many characteristics that make them different from other types of health insurance plans. These include pooling, risks, premium and employer size.
Many fully insured group health insurance plans are pooled, or grouped, in many states. This means that the employees of one company are grouped with those of another. Pooling employees in fully insured health plans helps to spread the risk of claims for medical costs among a larger amount of employees and employers. Small business groups are normally pooled to protect against financial loss that can result when an employee has a major medical claim.
When an employer pays the premium for a group health insurance plan, the insurance company is then responsible for paying any medical costs from eligible claims. Claims are paid based on the type of coverage and benefits that are provided by the policy. Out-of-pocket costs, such as the deductible or co-payment, will need to be paid by a covered employee. Employers are only responsible for paying the premiums for the health insurance policy.
Premiums that are charged for fully insured health insurance plans vary depending on specific factors. These include the size of the employer, the number of employees and how heath care is used by covered individuals. The amount of premium paid by an employer can change from year to year if the number of employees changes. Employers, however, do not pay a different premium for each employee, which keeps the costs consistent.
The size of employer is a factor that can determine if a health plan is fully insured or even if a group health insurance plan is available at all. Many small employers have a fully insured group health insurance plan. Data from the Employee Benefit Research Institute shows that 88 percent of employees working for companies with 3 to 199 employees had a fully insured group health insurance plan.
Rates for fully insured health insurance plans are affected by various factors. One factor that can affect the insurance rate is when an employer promotes health and wellness for employees. This includes promoting a healthy lifestyle, exercising, keeping a healthy body weight and avoiding the use of tobacco and alcohol. The belief is that employees who maintain a healthy lifestyle have fewer health-related claims.