Level Funding Could Save You Money

These are the recent renewal rates for a client with a fully insured HMO plan:

  • Single:  $541.33
  • Family:  $1542.78

These are the all in, maximum liability rates for a very similar level funded PPO plan:

  • Single:  $372.26
  • Family:  $1192.01

Fully insured employers pay an insurance company to take on 100% of the liability of the health claims for their employees and family members.  With a self-insured plan, the employer assumes the liability of their group’s health care claims, in return for the chance for lower cost, more control, and more flexibility with plan design.

Historically, self-insured plans were an option mainly for larger employers, but that’s changed over time.  One reason it’s changed is the advent of level funded plans.  A level funded health plan is type of self-insured plan that bundles administrative processes, pharmacy management, and stop loss insurance into one wrapper, billing the employer a fixed monthly cost that represents the MAXIMUM LIABILITY that the employer is exposed to for health care claims.

If claims are lower than expected, the employer gets a refund or credit at the end of the plan year.  If claims are higher than expected, there is no additional cost because the plan was funded at the maximum liability.

The pricing for these plans can be much lower than fully insured rates, but there can be some drawbacks:

  1. Some insurance companies require each employee to complete a health questionnaire before prices are finalized.
  2. Self-insured plans are not always subject to each state law, so there can be differences in the types of services covered.  For example, in Massachusetts, most fully insured plans cover in vitro fertilization and gastric bypass surgery.  Most of the level funded plans do not.
  3. They can be a little more complex to administer.

Despite the drawbacks, a level funded plan might be worth considering for employers with as few as 5 employees enrolled.

If you’d like to discuss level funding or other ways to reduce your health care spend, give us a call at (866) 724-0008 or click the button below.


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