If you are like most small employers, you are always looking for ways to control your group health insurance costs. Employers with at least ten full-time employees are exploring other funding options in the insurance market that will allow them more control, lower premiums, and accountability over their annual health insurance premiums. One of those is level-funding and is an attractive alternative for small employers.
Level-funding is simply a self-funding offshoot done by an insurance carrier. A company with 10 or more employees can explore level-funded plans. Generally, smaller companies are not large enough to operate with the risk of a self-funded plan. A level funded plan includes built in stop-loss coverage that comes into play for unforeseen larger claims. In its simplest form, groups that go level funded, will never pay more than their monthly premium, but can partake in a surplus if they have a good year.
Self-funded and level-funded plans, even for small groups, don’t need to be community rated as fully insured plans do. A level-funded plan can cost less to provide health benefits to the employees. The main difference between a level funded plan is that the insurance company can look at a group’s claims and population and raise or lower the rates based on their findings.
How does this impact your company? As always, insurance is a balance between costs and risks. A fully insured plan removes almost all the risk from the employer and employees, but in most instances the costs are higher. A self-insured plan leaves most of the risk with the employer, but the costs can be lower. A level-funded plan attempts to combine the two and give small employers a large employer edge.
If you would like to learn more about level funded plans and if your company could benefit, email logan@afc-ais.com to arrange a time to talk.