Group health insurance plans:
- A health insurer issues a policy outlining what is and is not covered.
- Benefits are outlined in the policy as well as deductibles and co-pays. Terms are not negotiable.
- Insurance has a fixed premium in effect for the term of the policy.
- The employer pays the premium to confirm policy acceptance.
- Workers often contribute toward the group insurance premium through payroll deduction.
- Group insurance contracts are subject to the state insurance regulatory agency in the state where the policy was issued.
Self-funded health plans:
- Employer assumes the risk (rather than an insurance company) by setting money aside to pay workers' health care costs.
- Benefits are outlined in a plan document created by the employer.
- The cost of the plan may need to be adjusted mid-year.
- A third-party administrator often administers the self-funded health plan and processes claims.
- Self-funded insurance (except those sponsored by school districts, municipalities and churches) must comply with federal laws including ERISA.