At Coterie Advisory Group we hear constantly from our broker partners of both potential and existing clients needing the advantages of self-insured health plans while maintaining financial certainty with reference to budgeting concerns. More often than not, level-funded health plans are the answers their clients are looking for, especially when we begin to discuss cost containment. Level funded plans allow organizations and employers the ability to garner the financial benefits and plan design flexibility available in a self-insured plan while also maintaining the lower risk and stable cost features associated with fully insured plans.
We’ve put together a review blog of sorts highlighting level funded plans and how they can benefit those organizations and employers looking for a cost containment strategy utilizing medical plan benefits. As always, if any of you, our broker partners have questions, please reach out. We also offer a weekly webinar where we discuss the benefits of Fundamental Care Tri- Level Limited Day Plans. You can schedule to join us by following the link here.
Now time for a review.
Level-funded health insurance plans, also known as "self-funded" plans, have become increasingly popular in recent years as a cost containment strategy for businesses of any size. These plans offer several key benefits, including stop-loss insurance for excess claim risk protection and the potential for refunds based on utilization. In this article, we'll take a closer look at how level-funded health insurance plans work and how they can help businesses provide better health insurance options to hourly and part-time employees.
What is a level-funded health insurance plan?
A level-funded health insurance plan is a type of self-insured group health plan that combines elements of both fully-insured and self-insured plans. Like fully-insured plans, level-funded plans offer a set of predetermined benefits and premiums to employees. However, rather than paying a fixed premium to an insurance company, the employer assumes a portion of the risk and pays for claims on a monthly basis.
Level-funded health insurance plans are typically designed for small to medium-sized businesses with 50-500 employees. These plans allow employers to have more control over their health insurance costs and benefits, while still providing employees with comprehensive coverage.
How do level-funded health insurance plans work?
In a level-funded health insurance plan, the employer pays a fixed premium, or "level," to a third-party administrator (TPA) each month. The TPA then uses these funds to pay for employee claims, as well as administrative expenses such as customer service, claims processing, and plan management.
The employer is responsible for paying any claims that exceed the level of premiums paid, up to a predetermined maximum amount. This maximum amount is known as the "stop-loss threshold," and it helps to protect the employer from excessive claims costs. If the claims costs exceed the stop-loss threshold, the employer can purchase stop-loss insurance to cover the excess costs.
Stop-loss insurance is a type of insurance that protects an employer from catastrophic claims costs. It acts as a safety net, covering any claims that exceed the stop-loss threshold. This helps to reduce the financial risk for the employer, making level-funded health insurance plans a more attractive option for small to medium-sized businesses.
In addition to stop-loss insurance, level-funded health insurance plans may also offer the potential for refunds based on utilization. If the claims costs for a given year are lower than the premiums paid, the employer may be eligible for a refund of the excess funds. This can help to further reduce the overall cost of the health insurance plan for the employer.
Benefits of level-funded health insurance plans for businesses
Level-funded health insurance plans offer several benefits for businesses of any size. These benefits include:
Cost containment: One of the main advantages of level-funded health insurance plans is their potential to help contain costs. By assuming a portion of the risk, employers can potentially save money on premiums compared to fully-insured plans. In addition, the stop-loss threshold and potential for refunds based on utilization help to further control costs.
Customization: Level-funded health insurance plans allow employers to tailor their benefits to the specific needs of their employees. This can be especially beneficial for small businesses, which may not have the resources to offer a fully-insured plan with a wide range of benefits.
Flexibility: Level-funded health insurance plans are also more flexible than fully-insured plans. Employers can adjust their premiums and benefits as needed, based on the needs of their employees and the financial performance of the business.
Predictability: Level-funded health insurance plans offer more predictability in terms of costs compared to fully-insured plans, which can experience fluctuations in premiums from year to year. This can help employers budget and plan for their health insurance costs more effectively.
Level-funded health insurance plans and hourly and part-time employees
Hourly and part-time employees often face challenges when it comes to accessing affordable health insurance. Many traditional group health insurance plans have minimum participation requirements, which can exclude part-time employees from coverage. In addition, hourly and part-time employees may not work enough hours to qualify for employer-sponsored health insurance benefits.
Level-funded health insurance plans can help to address these challenges by offering more flexible eligibility requirements. Since these plans are self-insured, employers have more control over which employees are eligible for coverage. This can allow businesses to offer health insurance benefits to a wider range of employees, including hourly and part-time workers.
In addition, level-funded health insurance plans may offer more affordable premiums for hourly and part-time employees. Since these plans are based on the specific needs and utilization of the group, premiums can be tailored to the specific needs of the employer and employees. This can make health insurance more accessible and affordable for part-time and hourly employees.
In conclusion, level-funded health insurance plans can act as a cost containment strategy for businesses of any size. These plans offer stop-loss insurance for excess claim risk protection and the potential for refunds based on utilization, helping to control costs and reduce financial risk for employers. In addition, level-funded health insurance plans can provide more flexible and customizable coverage options for hourly and part-time employees, making it easier for businesses to offer comprehensive health insurance benefits to a wider range of employees.
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:
An employer-sponsored, level-funded, Limited-Day Health Plan for small to midsize 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.