Regardless, the risk accepted is that of having to provide health care benefits to employees as needed. The providers will make a profit if utilization of their services is at or less than the level priced for when they negotiated their contract with the employer. The providers will lose money, and potentially be forced out of business, if overall utilization for the number of employees they have agreed to treat is higher than the total of the fees they have agreed to accept from the employer. This is not the case. Here the employer is seeking to remove all or part of its determinable contingent risk arising from its obligations under the health benefit plan it established for its employees.
Employers know that they stay ultimately obligated under the plan to their employees.
However, the employer has an expectation that when it prepays a fixed amount to someone to take over a variable obligation belonging to them, that the person or entity will be there when the time comes to perform. Insurance laws are designed to protect all consumers. Employers are consumers. Employers purchase all types of insurance to help covers risks that they are primarily liable for. A general scheme to distribute the loss among the larger group of persons bearing similar risks.