Fully Insured Health Plan

Definition

A fully insured health plan is the traditional employer benefit structure in which the employer pays a fixed monthly premium to an insurance carrier, and the carrier assumes all financial risk for employee claims. The premium is set at renewal based on the carrier's actuarial projections for the group, plus the carrier's administrative overhead and profit margin. If actual claims are lower than projected, the surplus belongs to the carrier.

What This Means for Employers

The predictable monthly cost is appealing, particularly for smaller employers with limited cash reserves. However, you are paying for the carrier's risk margin, administrative overhead, and profit — costs that disappear in a self-funded arrangement. More consequentially, you have no meaningful access to your own claims data in a fully insured plan, which means you cannot identify the cost drivers or act on them before renewal. Every year you accept the renewal without that visibility, you are managing your second or third largest expense in the dark.

Related Terms

• Self-Funded Health Plan
• Level-Funded Health Plan
• Medical Loss Ratio (MLR)
• Open Enrollment