Level Funded Health Plans: A Comprehensive Guide for Employers
In today’s ever-evolving healthcare landscape, employers continually seek effective ways to manage healthcare costs without compromising on the quality of coverage. Enter Level Funded Health Plans – a hybrid solution that offers the best of both self-insured and fully insured health plans. In this guide, we’ll explore the intricacies of these plans and why they might be the right choice for your organization.
What Exactly is a Level Funded Health Plan?
At its core, a Level Funded Health Plan allows employers to pay a consistent, set amount to a carrier each month. This fee generally covers:
- Administrative costs.
- A determined maximum claim liability.
- Stop-loss insurance to protect against high claim occurrences.
The combination of these components ensures both flexibility and financial predictability, much like a fully insured health plan.
Breaking Down How Level Funding Works
- 1. Claim Funding: This represents an estimated amount that goes towards the employer’s maximum yearly claims based on the overall health status of the employee group.
- 2. Administrative Fee: Level funded plans aren’t just about covering health costs. They also incorporate fees for administrative tasks like billing, processing, and customer service.
- 3. Stop-loss Premium: To safeguard employers from unexpected large claims and high utilization, these plans include a stop-loss insurance premium.
All these components together make up the total monthly payment that an employer makes.
The Financial Mechanics
What makes level funded health plans appealing is the predetermined monthly fee set either by the insurance carrier or a third-party administrator (TPA). This fee remains consistent over a year, and employers pay it each month irrespective of claims activity. If, however, at the end of the plan year, the actual claims surpass the projections, the stop-loss insurance steps in, shielding the employer from unforeseen costs. But, if your claims are less than the what was available, a portion of the surplus will be shared with you by the insurance company,
The Big Takeaway for Employers
If you’re an employer striving for both stability and cost-effectiveness in a health plan, level funded plans could be your answer. They offer:
- Predictability akin to fully insured health plans.
- Potential cost savings.
- Flexibility in plan design.
- Access to valuable claims data, much like a self-insured plan.
In conclusion, Level Funded Health Plans strike a balance between flexibility and predictability, making them a compelling option for many employers. If this sounds like a fit for your organization, or if you’re interested in exploring more, don’t hesitate to reach out for more information and additional resources on employee benefits.