A participating plan looks like a full-insured plan with level premiums for the plan year, but the insurance company will provide the company with a refund if the claims come in below the estimated amount.  No brainer?  Not really.  The insurance company may build in an addition margin on the premium for the possibility to get a refund.  The upside for the company is if the claims run higher than expected, the insurance company absorbs the cost (but will pass this on at renewal).  If the claims run better than expected, the company receives a refund.  But an experienced benefits broker/consultant will negotiate with the insurance company to credit the upcoming renewal pricing for a fully-insured plan to reflect the fact that the claims for the prior year we lower than expected. 

 

A participating plan may be a good alternative if the pricing starts out good and the margin added for the participating arrangement is not too high.