The Level-Funding Alternative
There is a rise in popularity in Level-funding plans within in the 51-99 market segment. Level-funded arrangements enable employers to benefit from the regular and predictable cost of a fully insured plan with the flexibility of a Self-insured plan and without the uncertainty of fluctuating claims costs. These plans are emerging as a great compromise between fully and self-insured plans as a way to minimize risk with cost predictability.
With level-funding, employers pay a set amount each month to the carrier to cover administrative costs, fees, and expected claims. The portion for the claims expenses is put aside into a fund to cover anticipated expenses, and the monthly premiums remain level for the entire plan year. The only fluctuation will be with that of new enrollments and terminations. If claims paid are less than the funded amount at the end of the plan year, funds may be partially reimbursed to the employer when coverage is renewed. On the flip side of that, if the plan runs worse than expected, the employer is not responsible to pay a deficit at the end of the plan year.
Level-Funding provides all the same advantages of self-insurance, including greater flexibility than a fully insured plan, so employers can tailor plans to their specific health care needs. Unlike fully-insured plans within the 51-99 market segment, Level-Funded plans allow employers to gain reporting on claims utilization that otherwise is not provided by the carriers within this market segment. This reporting is valuable when evaluating employee information, including age, chronic illness, risk factors and gaps in care. This data also allows employers to target the health issues that reside within their member population, and helps them design wellness programs to assist employees with total health management. Furthermore, level-funded plans are exempt from many of the federal healthcare law’s health insurance taxes, and are precluded from offering the government mandated essential health benefits.
If you are an employer who is interested in self-insuring but apprehensive to take on the risk of unpredictable costs, I would recommend looking at a Level-funded option at your next renewal. It just may be the alternative your business is looking for.