Designed to offer employers predictability, Level funded plans offer the potential of upfront savings and a surplus refund.
According to the Kaiser Family Foundation Employer Health Benefits Survey, level funded plans continue to garner support and use in the health insurance marketplace. Compared to just 7% two years ago, 42% of small firms in 2021 indicated that they are utilizing a level-funded plan.
Some may ask, what’s the driver for the expanded acceptance of these plans? Because of continuously rising healthcare costs, health insurers designed level-funded plans to offer the potential savings of self-funded plans, while mitigating risk. They also offer a potentially lower cost due to an opportunity for lower premiums upfront and a surplus refund if medical claims are lower than expected while still maintaining the predictability of fully insured plans.
In fact, employers with Fundamental Care Tri-Level Plans could be paying up to 40% less than with a traditional major medical plan. Fundamental Care prices its level-funded plans based on age bands (under 50, 50-59, and 59+.) Some factors that may affect prices are SIC Codes and Zip Code.
According to Aaron Cook, President of Coterie Advisors, “With Fundamental Care, we developed a unique benefit structure, known as limited-day, and utilized an alternative self-funding arrangement, known as level-funding. Together, they create significant cost savings and a usable health insurance plan with meaningful coverage.” Cook adds, “The pricing of Fundamental Care is targeted to be 30 to 40% less than the cost of traditional high-deductible health plans. But unlike other bronze-level plans which can include medical underwriting and high deductibles of thousands of dollars, our plan is guaranteed-issue with zero deductibles.”
For Brokers it is becoming common knowledge that once employers hear of level funding and realize the potential benefits and savings afforded them, they are inclined to receive information in regards to these plan options. Level funding allows brokers to be more agile and adjust quickly to the changes and needs of their customers. Plans are built to provide the stability in pricing that employers want while providing an opportunity for a surplus.
While there has been increased support, comprehending the value of level funded plans still requires some edification in the marketplace. At its core, level funded plans are basically self funded plans that offer 3 distinct elements, with certain plan components varying among carriers:
stop-loss insurance to mitigate risk
an opportunity for a surplus refund
a third-party claims administration agreement
To assist in how level funded health plans work, here’s how they compare to self funded and fully insured plans.
1. Level-funded plans provide predictability and mitigate risk to your client
Similar to a self funded, level funded plans allow employers to manage the financial risk of supplying health plan options. These plans allow your client this ability by paying employee medical claims directly.
How is risk mitigated with these plans? Level funded plans afford employers the ability to pay a fixed monthly fee, which covers the maximum claims liability, administrative fees and stop-loss insurance to protect against high utilization and unexpectedly large claims.
In the traditional self funded model, if claims are higher than anticipated, an employer pays more and receives money back if claims are lower at the close of the plan year. However, level funded plans cover the cost of individual or a collection of claims that exceed the plan's maximum, while offering an opportunity to receive money back if lower than expected claims result in a surplus. Essentially creating a space where there is limited probability of additional liability outside of what is being funded due to level funded plans mitigating the risk associated with self funded models.
2. The insurer might receive a surplus refund utilizing level-funded plans
With fully insured plans, the financial risk is shouldered by the insurance companies which are providing health services to an employer group. With a fixed monthly premium paid by the employer; claims, administrative costs, commissions and taxes are covered. When the plan year ends, if the actual health care claims are higher than expected, the insurer is responsible for paying them. In this model, the insurer also keeps the difference if the claims are lower.
In contrast, an employer with a level funded plan is insured against higher than expected claims while also being given the capacity to receive a surplus refund resulting from lower than expected claims.
This provides incentive to employers to keep their employee populations healthier, resulting in an opportunity for a greater surplus refund. Fundamental Care Tri-Level Plans offers a wellness program and virtual care which support the potential for employers to achieve these refunds.
3. Level-funded plans offer monthly reporting to help contain costs
Unlike most fully insured plans, employers with level funding have the ability to receive monthly reporting which helps in further understanding how employees are utilizing the plan benefits and to also view the claims submitted. Having this information available assists the employer in understanding how its member’s behavior could be driving up costs associated with the plan and its usage.
These insights enable employers to alert individual members that:
Low cost generic drugs can often be switched for brand name drugs
Going to urgent care may be more beneficial and cost less than going to the ER
Seeing a primary care provider virtually in lieu of in person can save time and money.
Detailed reports, especially for small employers, give them insights into their plan usage. Tracking usage over time and making informed decisions as needed helps drive a better member experience and makes way for better plan usage resulting in savings.
Why is level funding one of your best prospecting tools?
The average premium for family coverage has increased 22% over the last five years and 47% over the last ten years based on findings from the 2021 KFF Health Benefits Survey. Also indicated for 2021, the average annual premiums for employer-sponsored health insurance were $7,739 for single coverage and $22,221 for family coverage.
Utilizing the information above; recommending only fully insured plans more than likely means you may be missing out on an opportunity to save your potential and existing clients money. Additionally, you may find it increasingly difficult to attract new clients who are open to, or perhaps looking for, something different. Plus, with the increasing popularity and functionality of level funded options, you may lose potential or current clients to competing brokers.
To assist your clients with abundant savings, less risk, and more usable benefits, it’s imperative to have level funding as part of your suite of benefit plan options available.
There’s a number of plan designs available and circumventing through the minutiae and competing products can be challenging for some brokers. However, if you partner with the right team, you will quickly discover creative ways to get your clients the coverage they want and need at an affordable price, it’s well worth the effort.
We offer Affordability Based Medical Insurance Plans
Coterie Advisory Group’s Fundamental Care® programs are Affordability-Based Medical Plans which are designed for various niche-markets, including: small business and their employees, part-time, hourly, seasonal employees at enterprise-level companies, independent contractors, gig-economy workers, and association members. Fundamental Care is designed to meet the needs of the underserved, by providing access to unique and affordable health insurance benefits on a guaranteed issue basis. Limited-Day and Limited-Benefit Indemnity plans can be customized and structured with affordable premiums and no deductibles. Coterie Advisor's can also provide Minimum Essential Coverage (MEC) and bronze-level Minimum Value Plan (MVP) options for client's needing a solution for their full-time equivalent employees. The combined offering of the Fundamental Care plans is unique to the marketplace. Through Coterie's Affordability Based Medical Plan Strategy, the plans not only provide needed healthcare to the insured employees but also offer companies a strategy to improve recruiting and reduce turnover by rewarding a carve-out class or more-tenured employees.
Fundamental Care offers two Affordability-Based Medical insurance options which can assist:
An employer-sponsored, level-funded, Limited-Day Health Plan for small to mid-size employers and carve-out classes of large employers. Plans cost 30-40% less than HDHPs with no deductibles. A near-comprehensive plan that both employers and employees can afford.
THREE LEVELS OF PLAN
An affordable Bronze MVP plan – with no deductible
An affordable mid-range MEC plan with limited days of hospitalization– with no deductible
A Value priced outpatient expense MEC plan- with no deductible
A Limited-Benefit Indemnity Plan for large employers with part-time, hourly, and seasonal employees; and for associations and affinity groups. An affordable option for the uninsured that provides coverage for basic medical expenses.
Available with or without Minimum Essential Coverage (MEC) and Minimum Value Plans (MVP)
Both can be customized and structured with affordable premiums and no deductibles. The plans are high in potential coverage, guaranteed issue, and include upfront, day-one benefits.
Coterie Advisory Group, Inc. is a National insurance program manager and consultative advisor who delivers Affordability Based Medical Plan Strategies to help benefit brokers, consultants, employers, and associations in the benefits industry.
Available with or without Minimum Essential Coverage (MEC) and Minimum Value Plans (MVP)
Both can be customized and structured with affordable premiums and no deductibles. The plans are high in potential coverage, guaranteed issue, and include upfront, day-one benefits.
Coterie Advisory Group, Inc. is a National insurance program manager and consultative advisor who delivers Affordability Based Medical Plan Strategies to help benefit brokers, consultants, employers, and associations in the benefits industry.