Fully-insured health plans are the traditional way in which an employer sponsored plan is structured. Premiums are paid directly to an insurance carrier, who then pays health claims based on the plan benefits. The health plan retains the left over reserves even if the plan performs well.
A self-insured group health plan (or a ‘self-funded’ plan as it is also called) is one in which the employer assumes the financial risk for providing health care benefits to its employees. In practical terms, self-insured employers pay for each out of pocket claim as they are incurred instead of paying a fixed premium to an insurance carrier, which is known as a fully-insured plan.
Level-Funded plans act as a hybrid of fully-insured and self-insured plans. Employers pay fixed premiums monthly and then “settle up” at the end of the year. If there is a surplus of claims dollars, then 100% of those dollars are refunded to the employer.
Pharmacy Benefit Manager (PBM)
Pharmacy Benefit Managers serve as an intermediary between the insurance company or TPA and the pharmacies. They determine which pharmacies will be in the plans network, develop the formulary and negotiate, price rebates with drug manufacturers. Manufacturers provide these rebates in exchange for having specific medications listed on the formulary. PBMs are the only subset of healthcare that remains unregulated.
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