Are you a small-business owner struggling with the cost of group medical insurance? Level-funded health plans may be for you. According to the Kaiser Family Foundation’s 2021 Employer Health Benefits Survey, 42 percent of small businesses (those with fewer than 200 employees) reported that they offer a level-funded plan, compared to just 7 percent in 2019.
As medical insurance costs have continued to rise, health insurers have designed level-funded plans to give smaller businesses the potential savings of self-funded plans without the risks that usually come with self-funding. Like traditional fully funded plans, the carrier handles claim administration
and offers the use of their networks. But like self-funded plans, the employer sees the savings if the amount paid out in claims is lower than that year’s premiums. Level-funded plans also come with stop-loss insurance to protect the employer in the case of large, catastrophic claims they can’t absorb.
Level-funded plans also allow the employer access to more in-depth information about their claims history. This helps employers better tailor their plan offerings to their employees’ needs and determine the most effective wellness incentives to promote.
- Level-funded plans offer the possible cost savings of self-funded plans while protecting employers from large losses they can’t afford. Level-funded plans employers directly pay for their employees’ medical claims, like a self-funded plan. But they have measures in place to protect smaller businesses from larger claims they could never afford to cover. Level-funded plans come with a fixed monthly fee the employer pays to the carrier to cover administrative fees and network access, saving an employer the cost and liability of processing claims. They also include stop-loss insurance to absorb any costly, catastrophic claims that come up. So if a company’s claims are higher than expected in a given year, the employer is not stuck with the whole cost, which could be enough to sink a smaller business.
- If a company’s claims are lower than expected, they may receive a surplus refund with level-funded plans. With a traditional fully insured plan, the insurance carrier assumes all of the financial risk of covering a company’s medical expenses. The insurer pays medical claims for a fixed monthly premium. At the end of the plan year, if a group’s actual claims are higher than what they contribute in premium, the insurer absorbs the cost. And if they’re lower, the insurer pockets the difference. In contrast, an employer with a level-funded plan is insured against higher-than-expected claims thanks to stop-loss coverage, while potentially receiving a surplus refund if their claims expenses are lower.
- Level-funded plans offer employers greater insights to help contain costs. Level-funded plans come with claims reports more like those seen with self-insured plans. This lets employers see trends in plan and network usage, which allows them to determine what elements of their plan design are working for their employees and which need to be changed. This can also help employers choose wellness incentives that their employees will actually benefit from and use.
- Choosing level-funded plans does not mean you have to give up the member perks that come with fully insured plans. Level-funded plans from major carriers like UnitedHealthcare, Blue Cross Blue Shield, Aetna, Cigna, and Humana often allow employees to access the same virtual visit options, wellness incentives, and 24/7 helplines that come with their traditional fully funded plans. You also have access to those carriers’ provider networks, so choosing level-funded plans does not mean sacrificing convenience and services that employees value.
Our benefits team and Kamm Insurance Group has been helping smaller employers implement level-funded medical plans for years and can help you determine if this potential cost-saving options is for you. We can make sure you have a benefits package that meets your employees’ needs without breaking the bank.
