One of the biggest challenges for HR leaders is finding the right healthcare plan for their company. From setting up the plan to managing it, it can really be a time sink. Fortunately, how you fund your employee health plan can be a strategy for reducing administrative time and effort. If saving money on healthcare costs is your main goal, there might be better funding options out there. If reducing complexity is your goal, a fully insured health plan, the “set-it-and-forget-it” option of the benefits world, could be a great choice for your company.

What Is a fully insured health plan?

Think of a fully insured health plan as the all-inclusive resort of the employee benefits world. Here’s how it works:

• Your company pays a fixed premium to an insurance carrier.
• The carrier takes on the financial risk of covering your employees’ healthcare costs.
• You get predictable monthly expenses and minimal administrative headaches.

Let’s break it down with an example. Imagine your company has 50 employees. You decide to go with a fully insured plan and agree to pay $500 per employee per month, totaling $25,000 monthly or $300,000 annually. This amount stays the same regardless of how many claims your employees file. If Sarah from accounting needs a $50,000 surgery, your insurance carrier will cover it.

On the other hand, if the entire sales team stays healthy and barely uses their insurance, you still pay the same amount. The insurance company takes on the risk of high claims, but also reaps the rewards if claims are low.

In other words, you’re essentially outsourcing the risk and management of your employee health benefits to the insurance company. Sounds simple, right? But like any benefits strategy, it comes with its own set of pros and cons.

The pros of being fully insured for employee benefits

HR leaders love fully insured plans because:

• Predictability: Your costs are fixed, making budgeting less volatile.
• Less administrative work: The carrier is doing most of the heavy lifting on the administration of benefits, which means more time for other HR priorities.
• Risk transfer: The insurance company bears the financial risk of high claims.
• Simplified compliance: The carrier handles many regulatory requirements, reducing your workload and helping you stay compliant.

The cons of being fully insured for employee benefits

Some of the downsides of fully insured plans are:

• Higher costs: You’re paying for convenience and risk transfer, and that comes with a higher price tag.
• Less flexibility: Plan designs are often more rigid, leaving less room for customization or to get creative with benefits.
• No savings from low claims: If your workforce is generally healthy, you don’t reap the financial benefits.
• Less data access: You may have limited insight into claims data depending on your size and location.

Who should consider fully funded health insurance?

Fully insured health plans can be a great fit for certain types of companies:

• Small businesses: If you’re just starting or have a small team, the simplicity and predictability can be a lifesaver. After all, we know you’re already wearing a lot of hats.
• Companies with unpredictable cash flow: The fixed premiums can help with budgeting. (On the flip side, higher premiums could be a con if you can’t count on the same monthly income.)
• Those with a high-risk workforce: If you expect high claims due to your industry, location, or workforce demographics, then transferring that risk can be beneficial.
• Organizations with limited HR resources: If you’re an HR team of one, the reduced administrative burden of a fully funded health plan can drastically reduce your workload.

But here’s the thing: what works for one company might not work for another. That’s why it’s so important to have a conversation with your benefits broker about the best funding strategy for your unique situation.

Talk funding strategy with your employee benefits broker

When was the last time your benefits broker talked to you about your funding strategy? If you haven’t had a recent conversation — especially if you’re coming up on a renewal — put some time on the calendar to talk funding strategy.

Your broker can help you navigate the world of funding, from fully insured plans, self-funded options, and everything in between. They can help you weigh the pros and cons, considering your company’s size, risk tolerance, and financial goals.

The bottom line: knowledge is power

Whether a fully insured health plan is right for your company or not, one thing’s for sure: understanding your options is the way to start. Don’t settle for a one-size-fits-all approach to your employee benefits funding strategies.

Ready to explore whether a fully insured plan or another funding strategy is right for you? Let’s chat. At Nava, we’re all about helping you through the complex world of benefits with confidence. Because when it comes to taking care of your team, you deserve a partner who’s as invested in your success as you are.

Next steps

To continue learning about fully funded health insurance, watch our benefits funding masterclass.

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