Health News
Is Level-Funded Health Insurance the Right Choice for Your Small Business
August 09, 2024
Level-Funded health insurance is a hybrid model that blends the predictability of fully insured plans with the cost-saving potential of self-funded plans. It is designed specifically for small to medium-sized businesses looking to manage their healthcare costs without the volatility often associated with self-insured plans. In a Level-Funded plan, the employer pays a set monthly premium, which covers administrative fees, stop-loss insurance, and an estimated amount for claims. The unique aspect of this structure is the potential for a refund if claims are lower than expected, making it financially appealing for companies with healthy employees.
Level-Funded vs Fully Insured Plans
Level-Funded insurance distinguishes itself from fully insured plans by offering reimbursement for claims lower than anticipated, potentially leading to significant cost savings. Unlike fully insured plans, where the company pays a fixed premium regardless of actual medical claims, Level-Funded insurance allows companies to recoup funds if claims fall below the expected threshold. This feature introduces an element of flexibility and financial advantage not typically found in fully insured plans.
Furthermore, Level-Funded plans offer a transparent approach that allows employers to gain insights into their healthcare spending. This transparency empowers employers to make strategic decisions regarding employee health benefits, as they have a clearer understanding of their financial obligations and can adjust accordingly. However, in fully insured plans, the insurer manages all aspects of the plan, limiting employer control and visibility. This lack of transparency can sometimes hinder employers from making informed decisions about their healthcare benefits program.
Overall, while fully insured plans provide cost predictability, Level-Funded plans offer the potential for cost savings and greater control over healthcare spending. This distinction is significant for companies looking to manage their healthcare costs effectively while providing quality employee benefits.
Level-Funded vs Self-Funded Plans
Self-funded plans differ from Level-Funded plans because the employer assumes direct financial responsibility for the claims. This can be riskier, particularly for smaller companies facing unexpectedly high claims. Level-Funded plans mitigate this risk by combining fixed costs, Stop Loss premiums and projected claims into a predictable monthly amount.
Moreover, Level-Funded plans offer more predictable budgeting for healthcare costs, especially for companies seeking small-company health plans for employees. Employers pay a fixed monthly premium covering estimated claim costs and the stop-loss insurance premium. This model stabilizes monthly expenditures and provides an opportunity for refunds if the claims are less than the funds set aside, which is not typically available in traditional self-funded plans. This financial predictability is invaluable for small businesses that require consistent budgeting to manage cash flows effectively.
In a self-funded plan, the administrative burden lies in sourcing vendors such as TPAs for claims processing, obtaining stop-loss insurance for significant risks, and securing PBMs for pharmacy benefit management. This entails managing multiple vendors to coordinate the plan effectively. In contrast, a level-funded plan operates more like traditional insurance, offering a simplified, one-stop-shop approach where the employer selects a carrier or plan, pays a monthly premium, and receives comprehensive services without the need to manage multiple vendors. While self-funded plans offer potential savings and customization, they require more administrative effort and carry monthly claim volatility compared to level-funded plans.
Level-Funded vs Self-Funded Plans
Self-funded plans differ from Level-Funded plans because the employer assumes direct financial responsibility for the claims. This can be riskier, particularly for smaller companies facing unexpectedly high claims. Level-Funded plans mitigate this risk by combining fixed costs, Stop Loss premiums and projected claims into a predictable monthly amount.
Moreover, Level-Funded plans offer more predictable budgeting for healthcare costs, especially for companies seeking small-company health plans for employees. Employers pay a fixed monthly premium covering estimated claim costs and the stop-loss insurance premium. This model stabilizes monthly expenditures and provides an opportunity for refunds if the claims are less than the funds set aside, which is not typically available in traditional self-funded plans. This financial predictability is invaluable for small businesses that require consistent budgeting to manage cash flows effectively.
In a self-funded plan, the administrative burden lies in sourcing vendors such as TPAs for claims processing, obtaining stop-loss insurance for significant risks, and securing PBMs for pharmacy benefit management. This entails managing multiple vendors to coordinate the plan effectively. In contrast, a level-funded plan operates more like traditional insurance, offering a simplified, one-stop-shop approach where the employer selects a carrier or plan, pays a monthly premium, and receives comprehensive services without the need to manage multiple vendors. While self-funded plans offer potential savings and customization, they require more administrative effort and carry monthly claim volatility compared to level-funded plans.
Is Level-Funded Health Insurance the Right Choice for Your Small Business?
Choosing the right health insurance impacts financial stability and employee well-being. Level-Funded plans balance the predictable costs of fully insured plans and the savings potential of self-funded plans, making them particularly suitable for businesses with a stable, healthy workforce.
These plans offer a blend of cost control and reduced risk. Including stop-loss insurance protects against unexpectedly high claims, while the potential for refunds when claims are low can lead to substantial savings. Such features allow small businesses to tailor benefits closely aligned with employee needs and business objectives, enhancing overall job satisfaction and retention.
Why Choose Level-Funded Health Insurance?
Choosing Level-Funded health insurance offers several compelling benefits, particularly for small businesses seeking a blend of control, flexibility, and financial predictability in their healthcare spending:
- Cost Control: One significant advantage of level-funded health plans is enhanced cost control. Unlike fully insured plans, level-funded plans eliminate margins for insurance carriers, relying instead on administrative fees for specified functions. Employers fund claims on a flat monthly rate, removing volatility associated with self-insured plans. Risk is capped, ensuring employers never pay more than the monthly amount, even during claim spikes. Additionally, low claim years may result in refunds, a feature absent in fully insured plans. This cost control makes level-funded plans attractive for businesses seeking predictable costs and potential savings.
- Risk Management: Level-Funded plans effectively manage the risk of high medical claims by setting reserves at a fixed monthly amount. This approach ensures that expenses are within this threshold, providing businesses with stability and predictability in their healthcare expenditures. Level-Funded plans often include stop-loss insurance, which further safeguards against unexpected medical costs that exceed a predefined threshold. This combination of risk management strategies makes Level-Funded health insurance an attractive and secure option for small businesses, particularly those wary of the potential volatility associated with self-insurance.
- Transparency: Managing healthcare costs with a Level-Funded plan is often simpler and more transparent than traditional insurance models. Employers can receive regular reports detailing healthcare usage and expenses, allowing them to monitor trends, identify cost drivers, and adjust their health benefits policies accordingly. This transparency helps in making more informed decisions about future healthcare strategies.
- Predictability: Despite its similarities to self-funding, the Level-Funded model offers more predictability regarding budgeting for healthcare costs. The monthly premiums are fixed, and the stop-loss insurance protects against unpredictable, high-cost medical events. This predictability is crucial for small business planning and financial stability.
- Employee Satisfaction: Level-funded plans tend to be more cost-effective over time than fully insured plans and allow employers to reinvest saved funds into the plan. This potential for cost savings and reinvestment can lead to lower premiums, expanded coverage options, or enhanced wellness programs for employees, ultimately contributing to increased employee satisfaction and well-being.
Overall, Level-Funded health insurance provides a strategic advantage for small company health plans for small businesses looking to manage their healthcare expenses actively while still providing robust health benefits to their employees. It stands out as a smart choice for those who seek the control of self-funding but with less risk and more predictability.
Conclusion
The Level-Funded Advantage product, available exclusively through The CBC Health Insurance Marketplace for Costco Members, offers a unique opportunity for employers to achieve significant cost savings. With potential savings of up to 55% compared to fully insured ACA plans, the Level-Funded Advantage product offered exclusively through The CBC Health Insurance Marketplace for Costco Members provides a unique solution for businesses searching for efficient and affordable healthcare options. This product is designed to meet the needs of companies, delivering significant cost savings without compromising on quality or coverage.
Contact us today to learn more about how the Level-Funded Advantage plan can benefit your business and employees. Take advantage of this exclusive offering and experience the benefits of level-funded health insurance through The CBC Health Insurance Marketplace for Costco Members.
FAQs
Q1. Is Level-Funded Considered Self-funded?
A1. Yes, level-funded plans are a type of self-funded plan with an added layer of financial protection through a fixed monthly rate that includes all fixed costs and claim expenses.
Q2. What is the Level Premium Funding Method?
A2. This method involves paying a fixed premium that covers claims up to a certain level, with Stop-Loss insurance providing a safety net for businesses by covering anything beyond that threshold.
Brought to you by the insurance professionals at Custom Benefit Consultants, Inc.
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Employees, Organizational Mission, hybrid work models, remote work models, Connecting with Employees
