What is a Level Funded Health Plan?
Employers that want to attract and retain high-level employees need to create competitive benefits packages, and health insurance is one of the most important aspects of an attractive benefits program. When searching for health plans, it’s important to understand how different funding methods work to find a plan that suits your needs.
Level-funded health plans provide businesses with the predictability of fully-funded health plans while offering some of the cost-saving benefits provided by self-funded health plans. These plans are often more affordable, making them ideal for small and medium-sized businesses that want to provide high-quality coverage to their employees.
At KSA Insurance, we partner with major insurance providers like United Healthcare, Cigna, Blue Choice, and Trustmark to help businesses in South Carolina and across the southeastern United States find group health insurance plans that meet their needs as well as their employees’ needs.
To help you better understand your options for group health insurance plans, here’s what you need to know about what is a level-funded health plan.
What is a Level-Funded Health Plan?
A level-funded health plan is a type of self-funded health plan in which the employer makes a predictable monthly payment that contributes to a claims account, administrative costs, and stop-loss insurance.
The claims account stores funds that are used to pay for claims submitted by plan members. Stop-loss insurance comes into effect when the costs of these claims exceed the amount stored in the claims account.
Stop-loss insurance is a safety net that protects employers against claims that are higher than expected. Employers never have to pay more than the amount they contribute to the claims fund every year.
The employer’s monthly payments also contribute to administrative costs. This includes paying a third-party to handle administrative tasks like paying claims or handling customer service tickets.
With level-funded health plans, the monthly payments are estimated based on the expected cost of claims. At the end of the year, if the total claims are less than expected, the insurance carrier will issue a refund for the unused dollars. If the claim costs were higher than expected, the insurance provider will increase premiums accordingly.
Self-Funded Health Plans vs. Level-Funded Health Plans
While a level-funded health plan is considered a type of self-funded health plan, they are not the same thing.
With self-funded health plans, employers pay directly for the healthcare services their employees use. There is no stop-loss insurance, meaning the employer pays for all healthcare costs with no cap.
This can help employers save money if claim costs end up being lower than expected, but it can also increase costs if employees end up filing more claims than anticipated.
While self-funded health plans offer some cost-saving opportunities, they can make it difficult for employers to predict and plan around their healthcare expenses.
Benefits of Level-Funded Health Plans
Level-funded health plans are a desirable option for small and medium-sized businesses due to the wide range of benefits they offer, including:
- Predictable monthly payments.
- Cost-saving opportunities. Employers never have to pay more than their annual contributions thanks to stop-loss insurance.
- Fewer administrative responsibilities for employers as a portion of the monthly payments cover administrative costs.
- Opportunities for annual refunds if claim costs are lower than expected.
- Flexible benefits make it easier for employers to design custom health plans that suit their employees’ needs.
Level-funded health plans also offer more transparency by giving employers direct access to their data. This means they can see their claims histories, cost breakdowns, and other important information.
Who Are Level-Funded Plans For?
In most cases, level-funded health plans are best suited for startups, small businesses, and medium-sized businesses.
Fully-funded health plans are often too costly for small businesses, making level-funded health plans an affordable alternative for companies that want to provide comprehensive health coverage to their employees.
Level-funded health plans may also be the best choice for businesses and business owners that want more control over their healthcare costs, value predictable monthly payments, and want maximum transparency regarding how their money is being spent.
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Level-funded health plans help employers cut costs while providing high-quality health coverage to their employees. These plans make it easier for employers to plan around their healthcare costs and provide more transparency than fully-funded health plans.
At KSA Insurance, we partner with many major insurance carriers like Blue Cross, Blue Choice, and United Healthcare to help business owners in South Carolina and across the southeastern United States find health insurance solutions that work for them and their employees.
Contact us today to get a quote and learn more about level-funded health plans.
