What is the difference between Fully Funded, Self Funded or Level Funded Medical Plans?
There are three ways to fund employer-sponsored health plans, these include self-insured, level-funded, and fully-insured models. Each type has different dynamics and risks. The information reported on the 1095C varies based on plan funding.
Fully Funded or Fully Insured
A fully-insured medical plan is the traditional route of insuring employees. Employers buy coverage from an insurance provider and pay premiums directly to them. The insurance company then takes on the financial risk of providing coverage and managing the plan. When an employee files a claim, the insurance company pays the bill, not the employer. On a fully funded plan the employer does not need to report dependents, cobra participants or retirees on the 1095C form. The insurance carrier will report that coverage information to your covered employees on a Form 1095-B.
Self Funded or Self Insured
A Self Funded or Self Insured medical plan is when an employer or association assumes the financial risk of providing health care benefits to their employees. The employer pays for claims directly out of pocket as they are presented, while an insurance company manages the payments. A self-funded plan as a type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. On a self funded plan the employer must report dependents (spouse and children), cobra participants and retirees on the1095-C.
If you are not an ALE and you sponsor a self-funded plan, you will report that coverage on Form 1095-B to any employees covered by that plan.
Level Funded
A Level Funded medical plan is a self-insured plan that combines aspects of fully insured and self-funded plans. In a level-funded plan, employers pay a fixed amount of money to an insurance company every month to cover administration fees, medical claim payments for employees, and stop-loss insurance premiums. They then share the risk of the plan alongside the insurer. For purposes of the 1095C, a level funded plan is the same as a self funded plan. Employers must report dependents, cobra participants and retirees on the 1095-C form.
Need More Information? Your broker may be able to help you determine the plan funding of your employer sponsored plan.
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