What is the key difference between self-funded and fully insured plans on an experience report?

What is the key difference between self-funded and fully insured plans on an experience report?

• A. Self-funded plans include stop loss and admin fee, while fully insured plans include pooling point and premium.
• B. Self-funded plans include pooling point and premium, while fully insured plans include stop loss and admin fee.
• C. Self-funded plans are always cheaper and fully insured are always more expensive.
• D. Fully insured plans do not involve pooling or premium.

Answer: (A)

In self-funded plans, the employer funds the actual medical claims and uses a stop-loss policy to limit catastrophic claims, with an admin fee paid to the plan administrator for managing the claims. This structure shows up on an experience report as stop loss and admin fee. In fully insured plans, the insurer assumes the claims risk and charges a fixed premium to cover expected claims and administration, with risk pooled across many enrollees (the pooling point) by the insurer. So the key distinction is who bears the financial risk and how costs are allocated: self-funded uses stop loss and admin fees because the employer funds claims directly, while fully insured uses a premium and the insurer pools risk. The other statements don’t fit because pooling point and premium are characteristic of fully insured plans, not self-funded, and the idea that one type is always cheaper is not reliable.

In self-funded plans, the employer funds the actual medical claims and uses a stop-loss policy to limit catastrophic claims, with an admin fee paid to the plan administrator for managing the claims. This structure shows up on an experience report as stop loss and admin fee. In fully insured plans, the insurer assumes the claims risk and charges a fixed premium to cover expected claims and administration, with risk pooled across many enrollees (the pooling point) by the insurer. So the key distinction is who bears the financial risk and how costs are allocated: self-funded uses stop loss and admin fees because the employer funds claims directly, while fully insured uses a premium and the insurer pools risk. The other statements don’t fit because pooling point and premium are characteristic of fully insured plans, not self-funded, and the idea that one type is always cheaper is not reliable.