What are Level-Funded Health Programs?
Level Funded Health Programs resemble hybrids of traditional small group health insurance plans and self-funded insurance. This allows small businesses to step outside of the
ACA and provide their own health benefits. The plans include a stop loss insurance policy that acts as a hedge against claims over the total funded amount monthly. Other benefits
could include monthly premiums savings of 30% or more, as well as a potential end of year refund. 50% of businesses across the U.S. see refunds on these types of programs.
How Does Level Funding Work?
Not unlike traditional group plans, level-funded benefits programs have a set, or level, monthly premium throughout the year. Premiums are divided into three buckets.
One third pays employee claims, another third goes to plan administration (claims, network management etc.) and the final third pays for stop loss coverage. S
top loss protects business owners from self-insurance risks.
Unused portions of the claims fund may be refunded if unused by the end of the year. Plan administration costs and stop-loss premiums are not refundable.
Level-funded programs are utilization based in most cases, so businesses with healthier or younger employees could potentially save even more. Should businesses
exhaust a claims fund, employees are 100% protected by a stop-loss policy on claims over the annual funded amount.
What are the Advantages of Level Funding?
Level-funded programs do not pay premiums calculated with a community risk pool. The Affordable Care Act forces traditional small group (2-50) eligible employees
into a large, potentially riskier group when forecasting claims. One simply needs to view the 2017 publicly available rate increase for Montana to see how painful these
community rating structures can be for small businesses. Level funding keeps premiums lower in some cases, because a company’s risk is lower than the general population.
Level-funded programs allow businesses to recoup unused claims set aside. Traditional group plan premiums are non-refundable. In-addition, level-funded programs include
utilization reports, and so business owners have detailed information about overspending. If used properly, this information could save the company even more.