Small employers are becoming more irritated with the traditional Affordable Care Act plans (ACA, PPACA, Obamacare). Instead of rewarding the small business employer for a positive claims experience, the savings rewards go back to the carrier. It does not seem fair that the employer works hard to manage their claims favorably and encourages employee preventative care options (wellness programs, generic medications, telemedicine) without recognition from the carrier. Also, the flexibility of the healthcare plan designs offered by traditional medical insurance carriers is limited.
Level-funded group health insurance can be a solution that puts rewards back in your bank account and gain some flexibility.
Let’s look at five primary benefits of level-funded products for small employers with less than 100 employees:
- Cost Savings.
– Fully insured: Least risk, least reward. It’s true that fully insured health plans remove most of the risk from the employer. But as a result, the cost of the plan is much higher. And while the cost of a fully insured plan is predictable for the plan year, rates can – and will – rise in subsequent years should your claims exceed those forecasted by the carrier.
– Self-insured: Most risk, most potential reward. On the other hand, a self-insured plan leaves the most risk with the employer, but also has the greatest chance for producing savings in the form of claims being lower than premiums.
– Level-funded: Some risk, more potential reward. Level-funded health plans attempt to combine the best of both worlds, making partial self-funding a more viable option for a larger portion of employers, such as small businesses. They also reward the employer by giving a portion of unused claim dollars back to the employer to reduce premium costs for those groups whose claims are running well.
- Plan Design.
Level-funded and self-funded health plans also provide employers with far more flexibility in plan design and are exempt from some ACA regulations. such as the requirement to offer essential health benefits or the requirement to follow the three-to-one rating formula. Additionally, self-funded plans give employers access to invaluable data that can inform plan design, such as claims information, unit cost of healthcare statistics, utilization frequency, and prescription data.
Lastly, because of an ACA exemption, level-funded and self-funded health plans (even for small groups) enjoy the benefit of not having the same regulatory requirements as traditional, fully insured plans. Oftentimes, this means a lesser administrative burden on small companies that don’t have the same staffing resources as large employers. Therefore, level funding helps reduce overhead expenses.
- Wellness Incentives.
Many carriers offer walking programs, discounted gym memberships, preventative care rewards, and smoking cessation programs. They actually reward employees for achieving these goals and even contribute money to the employees that they can use to offset their out-of-pocket costs.
Carriers also usually offer a reduced-cost or free telemedicine program to allow employees to call a registered physician 24/7 that will diagnose simple medical conditions and prescribe medications over the phone or internet.
Please email Dan McNair, RHU or call me at 630-980-2111 to learn more about this great approach to healthcare affordability.