Employer-funding arrangements
n
There
are two types of funding arrangements that employers use:
n Fully-insured
n Self-insured
Fully-insured funding
arrangements
In
the fully-insured funding arrangement, the employer sponsors the insurance plan
for the employee and the insurer pays for the healthcare-related expenses of
the employee.
Features of fully-insured funding
arrangement:
·
The insurer bears the responsibility of
claim payments, incurred-covered benefits, and administering the health plan.
·
The employer simply pays a monthly
premium to the insurer for the services rendered.
·
If the claims or administrative
expenses exceed the collected premiums, then the insurer pays the difference.
Self-insured funding
arrangements
In
the self-insured funding arrangement, the employer directly pays for the
healthcare-related expenses of the employees.
Features of self-insured funding
arrangement:
·
The employer is financially responsible
for paying plan expenses, including claims.
·
The plan provides complete protection
on covered claims with cash flow advantage.
·
The plan offers a low monthly premium.
·
The plan requires a special bank
account to be set up by the employer to fund claims. If claims are high, there
will be predetermined monthly cap on account.
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