California Life and Health Insurance Practice Exam

In a fully insured group health plan, who is financially responsible for the payment of covered claims?

1. Employers

2. The government

3. Insurer

4. Employees

The correct answer is: Insurer

In a fully insured group health plan, the insurer is financially responsible for the payment of covered claims. This arrangement means that the employer pays a premium to the insurance company, which assumes the risk associated with covering the health care costs of the employees. When employees seek medical care and submit claims, it is the insurer that pays those claims directly to the healthcare provider, as they are the party taking on the financial risk. The employer's role in this arrangement is primarily to manage the policy and pay the premiums, while the insurer handles the claims processing and payouts. Employees typically do not have direct financial responsibility for the claims; rather, they may have co-payments or deductibles as part of their cost-sharing structure, but the bulk of the claim payment comes from the insurer's funds. This structure provides predictability for both employers and employees regarding healthcare costs.