This month we are talking about Level Funded Health Insurance plans because they can be a great alternative. Most Small Businesses have not heard of them, but don’t worry – we got you!
In a nut shell, think about it like this: Fully Insured Health Insurance plans rate your costs based on the zip codes and age of your employees. The risk is based on how much has been paid out in claims in that pool. It’s not based on the true health of the employee.
Ok, ok, ok. Let me break it down even more. What if your car insurance company quoted you based on your true claims history? Well for me, that would be great! Because I haven’t filed a claim in over 20 years. Based on my rates (and the fact that I work from home!) I would have significantly lower premiums. Unfortunately, my car insurance carrier rates my risk on the number of accidents that everyone else in my zip code has had. Leaving me, paying for everyone else’s claims. Le’Sigh. 🙄😣
BUT! With group medical insurance, there are carriers that will gauge the risk of insuring your group based on their true health history. This could possibly, drastically reduce rates for you and your employees.
Let’s Get Technical!
1. Definition of Level Funded Plans
Level funded health insurance plans are a hybrid between self-funded and fully insured plans. They are typically offered to small businesses with fewer than 100 employees, although the exact eligibility criteria may vary between insurance carriers.
2. How Do Level Funded Plans Work?
Risk and Cost Sharing: Level funded plans combine elements of self-funding and risk sharing. Employers pay a fixed monthly premium to the insurance carrier, which covers administrative costs and provides stop-loss coverage. Stop-loss insurance protects the employer from catastrophic claims that exceed a certain threshold. If claims costs remain below that threshold, the employer may be eligible for a refund or premium credit at the end of the year.
3. What’s The Benefit To You? Financial Flexibility!
Level funded plans offer small businesses greater control and financial predictability compared to fully insured plans. The monthly premiums are typically lower than those for fully insured plans, as the employer assumes a portion of the claims risk. If claims costs are lower than expected, the employer can potentially save money through premium refunds or credits.
Level funded plans can provide comprehensive health benefits to employees, including access to preferred provider networks, preventive care, and prescription drug coverage. The coverage is often similar to what is offered in fully insured plans, allowing employers to attract and retain talent by offering competitive benefits.
If you’d like to learn more about Level-Funded Health Insurance Plans, click here to book a short call.
Last Month’s Complimentary Employee Benefits Webinar
Last month we hosted a webinar, entitled: 401(k) Plans For Small to Medium Size Businesses: What You Should Know About Secure Act 2.0
If you missed our complimentary webinar on 401(k) plans last, here’s the replay. https://youtu.be/hq13UGT1DLE
See you soon!
Owner and President
The Benefit Boutique