Employee Health Insurance: Fully Insured vs. Self-Insured 

It goes without saying that the vast majority of all employers offer some sort of health insurance plan. In fact, the Society for Human Resource Management places the number at 98%. Of that total, the majority offer fully insured health plans. The remainder are self-insured.

Are there benefits to going with the self-insured model? Certainly. But there are also drawbacks. Among those companies that do self-insure, the positives seem to outweigh the negatives. It is something that companies need to figure out on a case-by-case basis.

The Main Differences Between Them

Fully insured and self-insured plans are similar in some ways but vastly different in others. The two main differences revolve around carriers and coverage decisions.

Dallas-based BenefitMall, a general agency providing broker services to thousands of brokers around the country, explains that a fully-insured plan is a group insurance plan offered through an independent insurance carrier. You have big names like United Healthcare, Aetna, and Blue Cross-Blue Shield, among many others.

Under a self-insured plan, there is no third-party carrier. There may be a third-party administrator involved in running a company’s plan, but the company accepts its own insurance carrier for all practical purposes.

As for coverage options, there can be vast differences between the two models. Insurance carriers are pretty static in terms of what they will, and will not, cover. Self-insured employers have a lot more flexibility. Most of them take advantage of that flexibility to give their employees more suitable benefits.

The Question of Financial Viability

So, why would a company choose to self-insure? The number one reason is cost. Though there are additional benefits to self-insuring, saving money is the most attractive draw. A well-positioned company with a strategically developed plan can save quite a bit of money by self-insuring.

Unfortunately, there is always a question of financial viability. A self-insured plan may look good on paper, but can the company maintain it over many years of covering employees? Ownership and executive management always need to keep in mind that their companies are not insurance companies. Insurance isn’t their primary business. On the other hand, insurance carriers do not have nearly the same level of concern over viability.

Covering Non-Traditional Therapies

Getting back to the coverage aspect, greater flexibility gives self-insured companies more options in terms covering non-traditional therapies. Two such therapies come to mind, beginning with regenerative medicine.

Regenerative medicine includes a range of procedures that traditional insurance carriers tend to shy away from. Stem cell and platelet-rich plasma (PRP) therapies immediately come to mind. A patient whose insurance doesn’t cover PRP injections has to pay for them out of pocket. Quite frankly, this is the case the majority of time. But companies that choose to self-insure can include regenerative medicine coverage.

Medical cannabis therapy is another non-traditional therapy insurance companies tend to keep at arm’s length. They have plenty of reason for doing so as long as state and federal laws disagree on medical cannabis consumption. In the meantime, self-insured companies located in states where medical cannabis is legal can opt to cover it for their employees.

Still Not the Norm

Self-insuring is obviously still not the norm in this country. According to the previously mentioned survey data, 72% of U.S. companies offer fully insured health plans. Just 26% are self-insured.

Both types of insurance plans have their pros and cons. To say that one is always better than the other is to misunderstand how health insurance works. That being said, few in the industry would be surprised to see more companies go the self-insured route in the years to come.