What does "fully insured" mean in health insurance context?

In the context of health insurance, "fully insured" refers to a situation where an employer pays a premium to an insurance company that assumes the financial risk for the health claims of the covered employees. Under a fully insured plan, the insurance company collects a fixed premium each month and, in return, provides coverage for healthcare services as defined by the policy. This means that when employees incur medical expenses, the insurance company is responsible for paying those claims up to the limits of the policy.

This setup contrasts with self-insured plans, where the employer assumes the risk and pays for medical claims directly instead of transferring that risk to an insurance carrier. The fully insured model allows employers to have predictable costs since they pay a set premium amount, and they are not liable for unexpected high claims that may occur among employees, as those fall on the insurance provider.

Other choices, such as the absence of costs associated with health insurance or employee deductions, do not accurately represent the fully insured concept. While employees may pay premiums or have payroll deductions, this is not a defining characteristic of being fully insured. Additionally, the idea that the insurance plan has no limits on coverage is misleading as most fully insured plans do have limits and exclusions. Thus, the correct interpretation focuses on the employer