What Is a Fully Insured Health Plan for Business?

If you want to attract and retain top employees for your business, consider offering work healthcare coverage. According to a 2024 study by Forbes Advisor:

• 67% of employees (and 68% of employers) state employer-covered healthcare is the top most-sought-out benefit for workers today. 
• More than 80% of employees older than age 42 are looking for roles that include employer-covered healthcare.
• 40% of employers believe workers would leave their jobs to find employment that offers better benefits.

One of the most common forms of employer-sponsored healthcare coverage is fully insured healthcare. In this guide, learn what fully insured health plans are and the pros and cons of choosing them for your business.

Fully Insured Health Plans Explained

Fully insured health plans provide peace of mind to employees that their healthcare needs are covered, with you sponsoring their coverage by paying their healthcare premiums. Healthy employees are more productive employees, as the Centers for Disease Control and Prevention reports:

• Healthier employees are less likely to use sick or vacation time due to sickness.
• That means, companies that support employee health are more likely to have higher numbers of employees at work every day. 
• A healthier staff reduces employee absenteeism, lowers costs to train replacement employees, and reduces overtime costs to cover absent employees.

Plus, like a study by the University of Oxford finds, happy employees are 13% more productive. Keeping employees happy and healthy is good for business.

With a fully insured healthcare plan, you pay a set amount each month to an insurer, who then takes on responsibility of covering employee healthcare costs that are included in the policy coverage. You know exactly what you’ll pay each month, and that covers everything from preventive care, to major surgeries and accident treatment. 

Under fully insured health plans, premiums are typically determined based on the number of employees who are covered in the plan. How are fully insured health plans priced? 

• For companies that have between 2 and 50 full-time employees, premiums are priced based solely on age and county.
• For companies with 51 or more employees, premiums are formulated based on underlying risk.

When the number of employees who are receiving coverage changes, that will also typically impact the monthly premium charge. Workers and their dependents will be required to pay deductibles and co-pays for services, based on the terms outlined in the policy. 

Fully insured plans make it easier for employers to plan their budgets related to healthcare coverage, since they know exactly how much they’ll pay to cover each employee. All expenses beyond the monthly premium become the insurer’s responsibility, which means fully insured plans could potentially lower costs for employers.

Pros of Fully Insured Health Plans

There are some advantages to fully insured plans for employers. Consider these benefits to determine if a fully insured health plan is best for your business.

• Fewer administrative expenses: With fully insured health plans, the insurer typically manages all administrative tasks related to executing the healthcare plan. This can make it easier for small businesses, especially those with 100 or fewer employees, to manage their healthcare administration and provide a beneficial service to employees with less hassle. Plus, it’s up to the insurance carrier to meet all compliance standards and federal and state legal requirements, which can free up the responsibilities of in-house human resources teams or eliminate the need to work with a professional employer organization (PEO).
• Attractive to employees: Fully insured healthcare plans are the top benefit sought out by employees today. Since employers also value this as the top benefit a business can offer to workers, fully insured health plans can help businesses be more competitive in attracting and retaining top talent.
• Reduced risk and improved predictability: Fully insured health plans offer businesses set prices on healthcare costs, which makes it easier for small business owners to manage their budgets and predict healthcare expenses. When employees do experience expensive healthcare needs, employers only have to worry about paying premiums, not full healthcare costs like other health plans might require. 

Because of fully insured health plans’ predictability and ease of use, they’re often an attractive option for many small business owners. 

Cons of Fully Insured Health Plans

There are also some considerations to keep in mind related to fully insured health plans for businesses. As you compare your health insurance options, keep the following in mind.

• Potentially more expensive: Sometimes, a business owner may pay more in premiums compared to what employees actually use in healthcare coverage. For example, an exceptionally healthy team may cost less on another type of health insurance plan, compared to paying full premiums on a fully insured plan. 
• Less flexibility: While the predictability of a fully insured plan makes it attractive for many business owners, there’s also less flexibility in how a small business can customize health insurance offerings. That means, you may be paying for healthcare coverage that most of your staff doesn’t need, such as pediatric care. You’ll typically need to adhere to the plan options set forth by the insurer and choose the best one for your business.
• Cost increases: Every year, the premium prices on a fully insured health plan may go up, so that’s something you’ll need to budget for if you keep that type of plan. 

For small business owners who want routine and less risk, fully insured plans may make sense. But if you want more control and potentially more financial savings when offering healthcare coverage to your workforce, options like self-funded or level-funded health plans may make more sense.

Interested in a Fully Insured Health Plan?

If you’re interested in offering a fully insured health plan for your employees, it’s helpful to compare this structure to other types of work health coverage plans, including self-funded health insurance for business, level-funded health plans, health savings accounts (HSAs) and health reimbursement arrangements (HRAs),  like qualified small employer health reimbursement arrangements (QSEHRAs) and individual coverage health reimbursement arrangements (ICHRAs).

At AZ Health Insurance Brokers, we can help your small business compare all your options, so you can choose the best work healthcare coverage for your employees and your budget. Contact us for a free work healthcare consultation online, or call 602.617.4107 or email quotes@azhealthinsurancebrokers.com, and we’ll be in touch.