Self-Insured vs Fully Insured in Oroville, WA

For most businesses, there will eventually be a point when you need to purchase and provide health insurance to your Oroville, WA employees. Doing so will be required by law if you have more than 50 people on the payroll, but even those who aren’t required by law to offer insurance should still consider doing so to keep morale high, protect your employees, and show them that you care.

Of course, when you begin shopping for a group medical insurance plan you will have to think about everything from copays to deductibles to premiums. Before you get into that, however, it’s worth understanding the difference between the two main types of group health insurance that is available. Self-insured and fully insured plans are both options to consider, and the big difference between them lies in where the risk lies. Taking a closer look can show business owners just why more and more companies are going for the self-insured route and what it can offer to your business as well.

Risk & Insurance

When it comes to insurance, everything really comes down to risk. The level of risk that a person brings with them to a policy directly impacts everything from their costs to the level of coverage that they have.

For example, a person who is older, overweight, and smokes will be much more likely to have to use their medical insurance policy than someone who is younger, physically fit, and a nonsmoker. This means that the person who has the larger risk will end up paying more for insurance and may not get the same level of coverage.

But in group insurance, that isn’t the case. The level of risk is spread across the entire group of members. Those who are a larger risk are offset by those who aren’t. As such, it’s more possible for an individual to get a policy that they may not have gotten otherwise.

This question of risk also applies to which type of insurance a Oroville, WA business uses when buying a group medical insurance policy – fully insured or self-insured.

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Fully Insured Medical Insurance

With a fully insured medical plan, the risk is carried by the insurance provider. This is the type of policy that is generally thought of when it comes to employer provided insurance. The business pays premiums to the insurance company and the insurance company covers the claims and other costs associated with all employee medical care that is covered by the policy.

It’s a standard enough policy, but does have some drawbacks. Most notably, it can be very expensive since the insurance company has a bigger risk on their shoulders. Washington employers may find that they have trouble fitting these policies into their budget if they have several employees.

Self-Insured Medical Insurance

Self-insured medical insurance is an option that more and more businesses are beginning to use instead of the more traditional fully insured medical plans. They are structured similarly and provide similar benefits to employees, but behind the scenes things are just a bit different.

In a self-insured medical plan, businesses assume the risk of insurance themselves. Instead of a regular premium payment, businesses will pay into a bank account that is set up specifically for insurance usage. The funds placed here are then used whenever an employee files a claim on insurance.

Since the insurance company essentially manages the policy but has no major risk on their shoulders in these types of policies, the costs to a business are generally much lower. Additionally, you can customize the coverage much more completely, fitting the coverage amounts into your budget while also making sure that your employees do have coverage.

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Costs with a self-insured plan are determined just like a traditional policy – information like number of employees and their ages are applied to a formula that provides a realistic estimate as to what annual costs are likely to be for medical care. Then, the formula determines monthly amounts that the employer pays and puts into the bank account. At the end of the year, any remaining funds may be reimbursed to the employer along with a portion going to the insurance company to cover their fees.

With lower monthly payments, more customization, and the possibility of reimbursement at the end of the year, any business that has a need for insurance for their employees will want to consider the benefits that self-insurance offers. It’s not hard to understand why more and more Washington small businesses are looking into this as an option for insurance.