Which of the following statements is correct regarding fully insured plans?

The correct statement regarding fully insured plans is that the insurance carrier processes and pays claims. In a fully insured plan, the employer purchases insurance policies from an insurance company, which then assumes the financial risk associated with the claims. This means that the insurance carrier is responsible for handling all claims, ensuring that employees receive their benefits as stipulated in the plan. The employer pays a fixed premium to the insurer, and in return, the insurer manages and pays for the healthcare claims that arise.

In the context of fully insured plans, it is essential to understand that the insurance company essentially takes on the risk, thereby providing financial certainty to the employer regarding their costs for employee benefits. This structure offers a more straightforward approach for employers, as they do not need to set aside funds to cover potentially high claim costs, which can be a significant worry in self-insured arrangements.

The other statements about fully insured plans do not accurately capture their key characteristics. Employers typically do not adopt higher risks with fully insured plans; rather, they transfer risk to the insurance carrier. Additionally, while fully insured plans can sometimes be more expensive compared to self-insured plans, this is not universally true and depends on various factors, including the specific health needs of the employee population and administrative expenses. Lastly