Life & Health Insurance Exam (National Portion)Health InsuranceMedium
A small business owner wants to provide health insurance for their employees but is concerned about the administrative burden and potential for high claims. They want a plan where the insurer takes on all the risk and handles all administrative tasks. Which type of group health plan best fits this description?
- AAdministrative Services Only (ASO) plan
- BPartially self-funded plan
- CFully insured plan
- DSelf-funded plan
Show answer & explanationAnswer & explanation
Correct answer: C. Fully insured plan
In a fully insured plan, the employer pays a fixed premium to an insurance company, and the insurer assumes all financial risk for claims and handles all administrative responsibilities. This is ideal for employers who want predictability and minimal administrative burden.
Why the other options are wrong
- A. ASO plans are for self-funded employers who outsource administration, not risk.
- B. Partially self-funded plans involve the employer taking some risk, often with stop-loss insurance.
- D. Self-funded plans mean the employer bears the risk and often handles administration.
Fully Insured Plan (Group Health)
A group health insurance plan where the employer pays a fixed premium to an insurance carrier, and the carrier assumes all financial risk for the payment of claims and provides all administrative services.
- Insurer bears 100% of the claims risk.
- Employer pays a predictable, fixed premium.
- Insurer handles all claims processing, regulatory compliance, and administrative tasks.
Memory trick: Fully Insured: The insurer takes 'full' responsibility.