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What is a Fully-Insured Health Plan?
A fully-insured health plan is a traditional employer–sponsored insurance plan, where businesses pay a set monthly premium to an insurance provider who takes full responsibility for all employee medical claims. Fully-insured plans decrease the amount of risk that employers take on, since the insurance company covers all claim payouts, no matter how many total claims are filed.
Fully-insured plans are a great option for small businesses as they offer stability, since monthly premium costs always remain the same. Additionally, they are generally easy to manage and comply with all Affordable Care Act (ACA) regulations, making them a great choice for companies seeking predictable prices, and minimal administrative work.
How Does a Fully-Insured Health Plan Work?
Fully-insured health plans are straightforward and offer small business owners flexibility and customization. Here’s how they work:
- Carrier Selection: First businesses must select an insurance carrier to work with either by directly contacting a carrier of their choice, or by working with a broker like EZ.Insure to compare the available options.
- Plan Selection and Deployment: Next, business owners select one or multiple plans to offer to their employees. Common plan types include HMOs, PPOs, EPOs, HDHPs and more. Owners also determine how much of the plan premium they will cover versus how much employees will pay. After outlining the options and process, employees who opt in will select the best available plan to fit their needs.
- Owners Pay a Monthly Premium: On a monthly basis, business owners will pay a fixed monthly premium directly to the insurance company.
- Employees Access and Claims: Employees gain access to the plan’s network provider and will submit claims for covered medical expenses. It’s important to note that the insurance company assumes the financial risk in addition to processing claims and paying healthcare providers for covered services.
- Employee Premiums: If employees have a monthly premium, the cost is generally deducted from their paycheck. In most cases, employees are also responsible for deductibles, copays or coinsurance, depending on the plan’s structure.
Why Are Fully-Insured Health Plans a Great Option for Small Businesses?
Fully-insured health plans serve as a great benefits option for small businesses mainly because they are predictable in terms of cost, while also satisfying employees.
- Predictability and Budgeting: Since monthly premiums are the same every month, it’s easier for businesses to manage their budgets, since there aren’t unexpected spikes in cost. Unlike self-funded and level-funded plans, costs won’t rise no matter how many claims employees make.
- Minimal Administrative Work: With self funded plans, the insurance company handles all the heavy lifting, so you can focus on your business operations. Administrative work completed by insurers includes claims management, compliance, and payments to providers. There’s also no need to purchase stop-loss insurance, since the insurance company assumes all of the financial risk.
- Employee Satisfaction, Retention and Attraction: Employees value you more than just a decent paycheck. In fact, year after year studies show that a comprehensive health insurance plan is high up on the list of employee job preferences. Not only does offering a fully-insured health plan keep current employees satisfied, but it’s also a great way to attract top talent and compete with larger organizations.
- Meets Legal Requirements: Since fully-insured plans automatically meet the standards established by the Affordable Care Act (ACA), you’ll never have to worry about compliance issues.
How Much Does a Fully-Insured Health Plan Cost for Small Businesses?
Factors Affecting Cost
The average cost of a small business fully-insured health plan varies based on a variety of factors. These include:
- Average Age of Employees: Younger employees tend to bring costs down.
- Number of Employees: Small businesses may face higher rates since they have less negotiating power.
- Employee Health Status: Unhealthy employees or employees with pre-existing conditions may increase premiums.
- Level of Coverage: Plans with lower deductible and copays tend to have higher premiums.
- Number of Benefits: Plans included add-on coverages such as vision and dental tend to cost more.
- Geographic Location: Some areas have higher healthcare costs, therefore premiums in these areas tend to also be higher. Additionally, individual state regulations may affect the overall cost.
- Claims History: If your business has had a high number of claims in the past, premiums will generally rise.
- Industry: Industries with higher health risk such as construction may face higher premiums.
- Administrative Costs: Different carriers have different costs associated with the administrative work they perform.
Average Cost for Small Businesses
Small business owners can expect to pay between $500-$1,000 per employee per month. Keep in mind that this is simply an estimate, and the amount you pay may vary depending on the factors listed above.
According to the Kaiser Family Foundation (KFF), for employer sponsored fully-insured health coverage, the premium cost for individuals is roughly $8,431 per year, and $23,968 for families.
Keep in mind that on average, employers contribute between 70-85% of premium costs, and the remaining cost is deducted from employee paychecks (but they can choose a lower percentage if they choose to).
Example Breaking Down Premium Costs
So as an example, let’s use the individual average premium costing $8,431. If you divide that by the 12 months of a year, you get $702.58 per month. This is the total monthly premium for an individual. Now, let’s say that the business owner decides to pay for 80% of premium costs. We simply multiply $702.58 by .8, which equals $562.06. In this scenario, the owner would pay roughly this amount each month per employee.
How Small Businesses Can Save on Fully-Insured Health Plans
While fully-insured health plans serve as comprehensive benefits options for small businesses, they can be pricey. As a business owner it’s important to do everything you can to budget your funds properly in order to reach your goals. With all that said, here are some ways to reduce the cost of premiums, and maximize your savings:
- Small Business Health Care Tax Credit: If you qualify for the Small Business Health Care Tax Credit, up to 50% of your premium costs could be covered. Qualifications include having less than 25 full-time equivalent employees, having an average employee salary of roughly $62,000 or less, paying at least 50% of full-time employees’ premium costs, and offering SHOP coverage to all full-time employees.
- Consider an HDHP: High-Deductible Health Plans (HDHPs) generally come with lower monthly premiums than traditional plans. Additionally, they are paired with Health Savings Accounts (HSAs) which allow employees to save pre-taxed money to cover out-of-pocket medical expenses.
- Offer Employee Wellness Programs: Some insurers offer discounts to businesses offering wellness programs since they’re designed to improve health and reduce claims. These programs oftentimes include mental health resources, smoking cessation programs, reimbursements for gym memberships and more.
- Offer Multiple Plans: Giving employees the option to choose between higher-tier and lower-costing options allows them to pick the plan best suiting their needs. This in turn reduces unnecessary costs for employers and employees.
- Compare Plans with EZ.Insure: Never settle for the first option if it doesn’t seem like a good fit. Instead, work with EZ.Insure to find the best plan to fit your team’s needs and your budget. Our platform lets you view competing plans side-by-side so you can be sure to get the best coverage and price.
FAQs
Are small businesses legally required to offer fully-insured health insurance?
No, under the Affordable Care Act (ACA), only businesses with 50 or more full-time equivalent employees are legally required to offer health insurance.
What is a full coverage health insurance plan?
A “full coverage” health plan simply refers to a plan that offers comprehensive, broad medical benefits including doctors visits, hospital visits, emergency room visits, prescription medication, mental health services and more. Essentially, any treatment needed that’s offered by the healthcare provider is included.
What are the cons of a fully-insured health insurance plan?
While fully-insured health plans off predictable costs, premiums are oftentimes higher compared to self-funded or level-funded plans. Additionally, premiums are subject to increase year over year with little to no explanation. Lastly, unlike level-funded plans, there is not a chance to receive refunds if employee claims are low, making it difficult to cut costs.
What is the difference between fully-insured and self-funded health plans?
The main difference comes down to who assumes the financial risk of claims. With fully-insured health plans, the insurance company assumes all of the claim costs and handles the processing, while employers pay a fixed monthly premium.
With self-funded plans, employers pay medical claims directly to medical providers out of pocket, whenever they arise. In most cases, a third-party administrator handles the claims process. All in all, these plans are riskier, but provide the opportunity to save money in the long run if claims remain low.
What is the difference between fully-insured and level-funded health plans?
With fully-insured plans, employers pay a fixed monthly premium and insurance companies handle claims. The insurance company takes on all of the risk.
With level-funded plans, the risk is split between an insurance provider and the employer. Employers pay a fixed monthly cost that goes towards claims, administrative fees and stop-loss insurance. At the end of the year if claims are lower than expected, employers can receive a refund.
Get the Coverage You Deserve with EZ.Insure!
EZ.Insure is here to help you get the best fully-insured health plan, or another alternative for your small business. Our platform offers free quotes, a side-by-side plan comparison tool, and 24/7 live expert assistance.
To get started, enter your ZIP code below, or call 844-770-0064.