Insurance Structures Explained...by How Much McDonald’s Money You Have

When you were a kid, asking your parents for McDonald's money was a big deal. Sometimes they said yes. Usually, they said no. Most of the time, they said “We have McDonald’s at home” which never made sense, because since when did McDonald’s ever sell bologna sandwiches?

Believe it or not, this is EXACTLY how insurance programs work. We’re going to use the McDonald’s Money concept to explain the difference between fully insured programs, large deductible programs and self-insured programs.

Fully Insured Programs

At this level, you are a kid with no McDonald’s money. Mom and Dad pay for everything. They decide what you eat, when you eat and where you eat. You’re just along for the ride. If you have a fully insured program (sometimes referred to as a Dollar One program because coverage starts at the first dollar) you pay your premium to the carrier and they make ALL of the decisions. They have full responsibility for your claims, so you have no say in how those claims are handled. Want a specific attorney to handle your defense? Sorry, you have no McDonald’s money. You don’t call the shots.

Large Deductible Programs

If you have a large deductible program, you’re a teenager with some money. Maybe you got paid to babysit your neighbor’s kid who made you sit there and listen to him explain the evolution stages of his favorite Pokemon. Now you have your own McDonald’s money! Except, you only have enough to buy some fries and a Coke. Mom and Dad still have to drive you there, and that’s IF they feel like driving you there. In a large deductible program, the carrier still pays for and controls the claim from the first dollar, but you pay the deductible. I’ve seen large deductible programs with deductibles anywhere from $15,000 to $150,000. As your deductible goes up, your premium usually goes down, and you finally get to make some small decisions. Perhaps the carrier will allow you to select preferred vendors or attorneys, but you still don’t have much of a say when it comes to claims handling.

Self-Insured Programs

Now you’re an adult! Not only do you have McDonald’s money, but you have steakhouse money! Maybe you don’t even want to go to McDonald’s anymore! Since Mom and Dad aren’t calling the shots, YOU bear the responsibility of your decisions. In a self-insured program, YOU are acting as the carrier. Not only do you make decisions on vendor panels, defense attorneys and claims handling, but you also must pay for the administration of the claims as well. Will you self-administer? Retain a third-party administrator? Will you need your own RMIS software? Who will handle Medicare reporting requirements? In a self-insured program, you are paying for and controlling the claim from the first dollar to the limit of your self-insured retention level.

The more McDonald’s money you have, the more control you have, but more control = more responsibilities. Just because you can buy 32 Big Macs doesn't mean you should.

If your insurance program was your McDonald's money situation... which one would you be right now?