Group Health & Individual Health
Key Differences

Fully Funded Health Plan

A fully-funded health plan is an employer-sponsored health plan. In these plans, your company pays a premium to the insurance carrier. These premium rates are fixed for a year and dependent on how many of your employees are enrolled in the plan each month. These premiums only change if your business decides to alter the number of employees enrolled. Your insurance carrier collects the premiums and then pays the health care claims.

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Self Funded

A Self Funded plan is one where the employer assumes the financial risk for providing health care benefits to its employees. In practical terms, Self-Insured employers pay for claims out-of-pocket as they are presented instead of paying a pre-determined premium to an insurance carrier for a Fully Insured plan. Typically, a self-insured employer will set up a special trust fund to earmark money (corporate and employee contributions) to pay incurred claims.

There are several reasons why employers choose the self-insurance option. The following are the most common reasons:

  • The employer can customize the plan to meet the specific health care needs of its workforce, as opposed to purchasing a 'one-size-fits-all' insurance policy.
  • The employer maintains control over the health plan reserves, enabling maximization of interest income - income that would be otherwise generated by an insurance carrier through the investment of premium dollars.
  • The employer does not have to pre-pay for coverage, thereby providing for improved cash flow.
  • The employer is not subject to conflicting state health insurance regulations/benefit mandates, as self-insured health plans are regulated under federal law (ERISA).
  • The employer is not subject to state health insurance premium taxes, which are generally 2-3 percent of the premium's dollar value.
  • The employer is free to contract with the providers or provider network best suited to meet the health care needs of its employees.

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Level Funded Health Plan 

This is an insurance arrangement in which an employer pays a health carrier a set monthly payment to cover the estimated cost for expected claims, administrative costs, and stop-loss insurance premiums. If actual claims are lower than expected, the employer receives a refund for unused dollars at the end of the plan year. If actual claim costs are higher, the carrier makes an end-of-year adjustment to increase the premium on the employer’s stop-loss insurance. Level funded health plans are a great way to limit an employer’s risk while introducing them to the benefits of self-funding.

Here’s four reasons why:

  • Predictable Expenses: Employers that switch from the fully insured model get to keep the predictable expenses they’ve grown accustomed to while reaping the rewards of unused care.
  • Lower Administrative Burden: The insurer typically covers all the TPA, pharmacy benefits, and stop-loss duties, which means it’s a one-stop solution for your business.
  • Health Claims Rebates: Employers that have healthy, engaged workforces can stand to save a significant sum of money at the end of the plan year.
  • Data for Future Savings: Employers can use their level funded data to plan for and optimize a self-funded plan for even more cost-savings in the future. (Fully insured employers do not have access to their data.)

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Reference-Based Pricing Healthcare

RBP, is a pricing methodology that prices a claim or bill for medical services starting at a benchmark or reference price versus a discount off of billed charges. Unlike traditional PPO plans, reference-based pricing doesn't require the use of a network. The plan reimburses the same amount—no matter which health care provider members choose. 

RFB plans use a fair, collaborative approach to health coverage that:

  • Reduces health care costs by up to 20%.
  • Eliminates wide variations in the cost of care, compensating providers equally for the same care.
  • Increases transparency of cost and empowers plan members to make better decisions

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ICHRA

Individual Coverage HRA can be a cost saving alternative which allows employers the opportunity to increase flexibility and employee choice by designing a reimbursement plan for their employees individually purchased insurance.

Employees benefit from this program in that they are:

  • Not subject to enroll in a one-size-fits-all health plan but rather shop from a large variety of individual plans which meet their specific needs.
  • Employer funds are tax-free under an ICHRA program, whereas employer funds to help pay for an individual plans outside of ICHRA are not.
  • If an employee is already covered on their spouses' health plan, then they can use the employer funds to pay for other approved health plans or medical expenses. 
  • Individual plans are portable therefore interruption or loss of coverage due to employment termination does not factor. Federal subsidies for individual plans can become available when an employee has been terminated, therefore making it a preferable option over COBRA. 

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