Fully insured plans mean that the insurance carrier, not the employer, is responsible for paying all claims incurred by the group of employees. Employers that choose a fully insured plan do not want to assume the financial risk associated with health claims because the overall financial health of the company could take a huge hit if a catastrophic claim, or more claims than expected, are presented for payment. The employer would rather assign this risk over to the insurance carrier.
Employers that choose a fully insured plan will be rated by the insurance carrier who will assess the overall “risk” of the group including the number of employees, ages, health, etc. The health carrier will guesstimate what they perceive the potential costs could be for the group, trend this number up a bit and add in the cost to administer the plan as written in order to come up with a monthly premium that the employer will be required to pay to keep the coverage active. Failure to remit payment timely, will result in a lapse in coverage for all members of the plan. No eligibility and no claims payments will be made until the account is brought current.
Employers may pay all of the premium costs or they may require the group of employees to contribute towards the cost as well. The goal is that the premiums collected will be enough to cover ALL claims that come in, as well as the costs to administer the plan. Any overage will be the insurance carrier’s profit. On the reverse, the health carrier will be responsible for paying any shortage, either due to inadequate premium collection or higher than expected claim volume or costs.
Employers are usually locked into that premium rate for one year; unless more employees are added. After one year, the insurance carrier will review the claims history and overall health of the group to decide if a premium increase is warranted. At that time, the employer can accept the premium increase (it may be passed on to the employees who will see more money taken out of their checks for healthcare) or the employer can switch to another insurance carrier who will guarantee a lower rate.
So why does it matter if a plan is fully insured?
How the plan is administered is usually invisible to the plan members and really does not matter except in the case of appeals. If coverage is denied or a claim is not paid as expected, before the appeal is started, you will want to know if this plan is fully or self-insured. This gives a clear idea on how the appeal process should be handled.
To appeal a fully-insured claim:
1. Review the back of the EOB to determine the appeal process.
2. Normally, a call can be placed to the health carrier to try to get the issue resolved by phone.
3. If unable to resolve by phone, a written appeal will be sent to the health carrier who will determine if the claim was processed correctly based on the plan benefits.
4. Once all appeal options have been exhausted and you are still unsatisfied, the PATIENT can file a complaint with their state’s Department of Insurance.
The Department of Insurance will work on the patient’s behalf by contacting the health carrier to try to get the issue resolved.