Health insurance 101: Fully insured group plans vs. self-funded group plans—what’s the difference?    
BCBSNM offers health plan coverage to individuals and to employers. The latter is known as group coverage. There are two types of group coverage: Fully insured and self-funded. In a fully insured plan, the employer pays a monthly premium to a health insurance company. Premiums may be based on a pool of claims from a number of employers. Premiums are due before coverage is effective and is projected by an actuary to cover anticipated claims cost. In exchange for the premium, the insurance company provides health coverage for the employer group. The monthly premium usually remains constant over a set period of time, e.g., one year.

In a self-funded plan—also known as an Administrative Services Only (ASO) plan—the employer pays for its covered members’ medical claims out of its own financial resources. The employer also pays a set fee to a plan administrator (a health insurance company) to process claims. Unlike a fully insured plan, a self-funded employer pays benefits based only on their employees’ previous or potential claim experience. Employers have control over the funds set aside to pay health claims. This allows employers to invest funds for maximum return until they are needed to pay claims.

Blue Review • February 2012 • bcbsnm.com