Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Health InsuranceEasy
A small business owner in Florida is looking to provide health insurance for their 12 employees. They are concerned about the administrative burden and the potential for fluctuating premiums. Which type of group health plan is most likely to meet their needs by offering predictable costs and simplified administration?
- ASelf-funded plan
- BAdministrative Services Only (ASO) plan
- CExperience-rated plan
- DFully insured plan
Show answer & explanationAnswer & explanation
Correct answer: D. Fully insured plan
A fully insured plan involves the employer paying fixed premiums to an insurance carrier, which then assumes the risk and handles all claims administration. This provides predictable costs and reduces the administrative burden for the employer.
Why the other options are wrong
- A. Self-funded plans require the employer to bear the risk and manage claims, increasing administrative burden and cost volatility.
- B. ASO plans are for self-funded groups, where an insurer provides administrative services but not risk coverage.
- C. Experience-rated plans adjust premiums based on the group's past claims, leading to fluctuating costs.
Fully Insured Group Health Plan
A group health plan where an employer pays a fixed premium to an insurance carrier, transferring all financial risk and administrative responsibilities for claims to the carrier.
- Employer pays fixed premiums.
- Insurer assumes financial risk.
- Insurer handles claims administration.
- Provides predictable costs for the employer.
Memory trick: Full protection means fixed payments and no risk worries.