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What is a Level-Funded Health Plan?
A level-funded health plan is one type of employer-sponsored health insurance that offers business owners more flexibility and savings potential compared to traditional, fully-insured health plans. Level-funded plans are created by combining aspects of self-funded and fully-insured health insurance, helping small businesses manage high healthcare costs, while also providing employees with quality benefits.
Unlike traditional, fully-insurance health plans, with level-funded plans business owners incur some of the financial risks for claims. On the flip side, level-funded plans also present the opportunity for refunds, if claims are lower than expected.
How Do Level-Funded Health Plans Work?
Monthly Payments
Business owners with level-funded plans pay a fixed monthly premium that covers:
- Their employee’s health insurance claims.
- Administrative costs (for things like claims handling and plan management).
- Stop-loss insurance (protection limiting owner liability, by covering the costs of excessive claims that go over the predetermined limit).
Claims Processing
Another great feature of level-funded plans is that business owners don’t have to deal with lengthy, complex claim processes. Instead, the insurance provider or third-party administrator does all the heavy lifting, handling the claims and paying the healthcare provider.
End-of-Year Settlement
At the end of the year, if employee claims are lower than expected, business owners may receive a refund or credit. On the other hand, if claims are higher than expected, stop-loss insurance takes action by covering the additional costs. It’s important to note that if claim amounts exceed the stop-loss coverage limit, business owners have to pay the extra cost out of pocket.
How Do I Set Up a Level-Funded Health Plan?
Setting up a level-funded health insurance is pretty similar to setting up fully-insured plan, but has some minor differences:
- Assess Your Business Needs: Like any insurance process, before selecting a provider you’ll want to assess your business and employee’s needs. This includes factors such as employee risk factors, budget, number of employees, demographics and expected use of the plan.
- Select an Insurance Provider: Select an insurance provider or work with a broker like EZ.Insure, to select a level-funded plan that fulfills your team’s needs and preferences. Once you’ve selected a provider, they’ll calculate your fixed monthly payment amount. During this process, the provider or broker will also set up your stop-loss insurance.
- Customize Plan Options: Just like a traditional fully-insured group health plan, you can choose to offer your employees just one plan or multiple options. This includes your standard plan types such as PPOs, HMOs, HDHPs, EPOs and more.
- Employee Enrollment: After choosing your plan offerings, it’s important to educate your team on the available options, and help them through the enrollment process. For extra help, talk to your insurance agent or provider about holding a brief webinar to walk employees through the steps.
- Track and Adjust: Keep an eye on healthcare costs, plan usage, and claims made. This information will help you determine whether you need to make any adjustments at the end of the year or not.
To find a level-funded plan that fits your business’s budget and needs, work with EZ.Insure! Our platform offers side-by-side plan comparisons, and personal assistance from licensed insurance agents, so you can be sure to choose a plan that checks all the boxes. To get started, just enter your ZIP code below or call 844-770-0064.
How Much Do Level-Funded Plans Cost for Small Businesses?
Level-funded health plans vary quite a bit in price, therefore it is difficult to provide an accurate estimate. With that being said, they tend to be more affordable than fully insured plans, especially if your business doesn’t have a high number of employee claims.
Factors Influencing the Cost of Level-Funded Plans
- Business Size and Demographics: The fewer employees you have, the less you’ll likely have to pay per month. Additionally, companies with younger, healthier employees may benefit from cheaper costs.
- Type and Number of Plans Offered: Monthly costs may also be affected by the type of plan you choose such PPOs, HMOs or HDHPs. Also, cost may increase if you opt to offer multiple plan options.
- Geographic Location: Healthcare costs vary depending on where in the country your business is located.
- Claims History: Insurers generally evaluate the claims history associated with a company and its employees. A high number of expensive past claims may increase the overall price.
- Stop-Loss Insurance Amount: Since stop-loss insurance is a large contributing factor to level-funded plans, a higher limit usually costs more.
Why Are Level-Funded Plans a Great Option for Small Businesses?
- Predictability and Control: Monthly payments are fixed, so there are no surprises.
- Healthy Groups Lower Costs: Businesses have the opportunity to save money through end-of-year refunds, if there are less employee claims than expected.
- Customization: Just like a traditional health plan, employers can choose from a variety of plan types, benefit structures, coverage levels and networks.
- No State Taxes on Premiums: In many states, level-funded plans are exempt from premium taxes, helping to lower overall business costs.
- Stop-Loss Insurance: Even if employee claims are higher than expected, stop-loss insurance will pay most, if not all of the extra expenses.
FAQs
What happens if employee claims are higher than anticipated?
If employee claims go over the allocated claims fund, stop-loss insurance works by covering the extra costs. The only time you’ll have to cover extra claims costs out of pocket is if the amount exceeds the stop-loss coverage limit.
What’s the difference between level-funded and self-funded health plans?
Level-funded health insurance plans offer fixed monthly payments, while self-funded plans have fluctuating costs based on the actual claims. Additionally, while level-funded plans provide stop-loss insurance to cover the risk of high claims, with self-funded plans, business owners fund large claims themselves.
Lastly, with level-funded plans, third-party administrators generally handle claims processing, while self-funded plans require more direct employer involvement. All in all, businesses take on much more risk with self-funded plans as opposed to level-funded plans, where the risk is shared between owners and providers.
What’s the difference between level-funded and fully insured health plans?
The main difference is that level-funded plans include stop-loss insurance and provide businesses with the chance to save money in the form of refunds if claims are lower than expected. On the other hand, businesses with fully insured plans pay a fixed premium to insurance carriers who assume all of the risk.
This means there is no chance of refunds, but also no chance of having to pay extra money at the end of the year if claims are higher than expected.
What is the difference between graded funded and level funded?
While level-funded plans have fixed monthly payments covering claims and other fees, graded funded plans start with a lower premium and gradually increase over time. Both plan types offer potential cost savings in comparison to fully insured plans.
How much can business save with a level-funded plan?
On average, businesses save anywhere from 5-30% on costs compared to fully insured plans. Businesses with healthy employees, and a low number of healthcare claims save the most with level-funded plans.
Can small businesses qualify for level-funded health plans?
Yes, businesses with as little as 2 employees qualify for level-funded health insurance.
Get a Level-Funded Plan Today with EZ.Insure!
Level-funded plans stand as an excellent alternative to traditional fully insured health insurance plans. Especially for businesses expecting a low number of claims, who want more control and the opportunity to save money, level-funded plans are the perfect choice. Don’t wait any longer, to give your employees the protection they deserve, instead get started with EZ.Insure today!
Our platform offers 24/7 expert assistance, free customized quotes, and our side-by-side plan comparison tool, so you can be sure to get the coverage of your dreams! To get started, just enter your ZIP code below, or give us a call at 844-770-0064.