What is a Level-Funded Health Plan?

According to the nonprofit National Business Group on Health (NBGH) survey 2019 Large Employers’ Health Care Strategy and Plan Design, the cost of employer-based health insurance is poised to reach roughly $15,000 per employee this year, a 5 percent increase from 2018. While this is not unusual, it is forcing businesses to get more creative with the employer group health benefits offered to their employees. In fact, NBGH president and CEO Brian Marcotte even went so far as to say that “Health care cost increases continue to outpace workers’ earnings and increases in inflation, making this trend unaffordable and unsustainable over the long term.”

51 percent of the companies that participated in the aforementioned survey also indicated that they would be taking steps to add more virtual care solutions to their benefits portfolio to help combat rising health insurance costs.

Another cost-saving tactic more companies are shifting toward is level-funded group health plans.

Level-Funded Health Plans

Level-funded health plans are ERISA compliant, partially self-insured plans designed to offer employers more flexibility and potential for 15%-30% cost savings. These plans are available to groups with two or more employees, have a wide range of industry-leading insurance companies to select plans from, and a nationwide network of hospitals and physicians that employees will be able to choose from.

Key components of these plans:

Claims Account

When a group signs up for a level-funded health plan, their insurance carrier can estimate the number of claims it will receive based on the group size. As each employee’s premium is paid, that money goes into a claims account. If at the end of the year there is a surplus of money remaining in the claims account, the employer will receive that money back.

Stop-Loss Insurance

If your group encounters higher-than-expected claims and your claims account is depleted, your Stop-Loss Insurance will step in to protect your finances and cover any overrun. This is included in your fixed cost along with taxes, commission, and administrative costs for level-funded health plans.

Plan Administration

A third-party administrator often handles the day-to-day functions of the program, allowing you to focus more on running daily operations.

Could a level-funded health plan be right for your firm?

What’s great about level-funding is that you simply pay your monthly premium and the insurance company does the rest. It walks, talks, and feels exactly like a traditional health insurance plan.

If you’re wondering whether a level-funded health plan could be right for your business, our licensed benefits counselors are here to help.