What is a Level Funding Health Plan?

Level funding plans are unique group health contracts offered to small groups with 5-100 employees. With the emergence of strict ACA mandates and rising community based rates the insurance industry has found a way to bring down small group health premiums through the self funded laws. Like large corporate self-insured plans, level funded allow smaller businesses to better manage their healthcare budget and increase cash flow. However, what separates level funded apart from true self-insured plans is that the premiums are the same every month. More importantly there is no risk that a large claim could strap a companies cash flow. So they look very similar to fully insured ACA plans but have the make-up of a self-insured plan. The fixed monthly premium is composed of claims funding, stop-loss premium and administrative fees. The insurance carrier will take care of claims that go over the stop-loss limit, which is usually around $20,000. If total claims paid for the year by the employer claims reserve bucket are less than the allocated amount then companies will receive a refund for the excess. 

 

Which companies are best suited for Level Funding?

  • Companies with 5-100 employees

  • Companies that want the familiar structure of a fully-insured plan, but like the risk sharing advantages of a self-insured plan

  • Companies with healthy employees that feel they are paying too much for health insurance and need a lower cost solution

  • Companies that want to earn a potential refund of unused premium dollars

  • Companies that want to maintain a national insurance carrier for their benefits plan like, Aetna, Cigna, Humana and United Healthcare

 

Under Affordable Care Act (ACA) risk pools are now defined as small or large groups. A small group is a company with 2-50 employees and a large group is 51+. Small group rates are considered community rates. This simply means the insurance company has a pre-determined set of rates based on age and geographic location. level funding is an option to get out of the community rates under ACA and create your own risk pool based on your own employee base. The key that every employer must realize when exploring level funding plans is you have to qualify medically upfront for the policy. Any high risk employees can disqualify the group up front. Perhaps you do qualify up front but inherit high risk along the way then you need not to worry because a group or an employee can not be dropped. If you are worried that the renewal rates may go through the roof then you’ll always have the option to go back to the fully insured ACA plans. It is really a no loose situation assuming your companies can qualify. We highly recommended to look at level funded plans as part of your companies annual health plan review. 

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