Page 39 - Delaware Medical Journal - January/February 2021
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MCSADSISE CROEPRONRERT
LEVEL-FUNDED PLANS:
A Great Health Benefit Option for Small Practices Sharon Ruth
healthy workforce could pay less toward claims, while covering higher-than- anticipated annual claims with a stop-loss policy. It’s important to note that these policies are underwritten either by medical conditions or RX claims, depending on group size. At the end of a year, if an employer’s total payments are greater than the actual claim costs, the surplus will be refunded. However, if employee claims exceed what’s been paid, embedded stop- loss insurance covers the difference.
COMPONENTS OF A LEVEL-FUNDED PLAN
There are four components to a level- funded plan that make this product attractive to small-group employers.
1 Administrative and will not change regardless of claims. This is the cost employers pay for network availability, claims adjudication, and prescription network.
2 Aggregate stop-loss coverage covers the entire workforce and acts similarly to the way a family deductible would for employees. If together, your employees incur enough claims that they reach the aggregate stop-loss deductible (even if you’ve not reached your individual stop- loss deductible), the reinsurance kicks in and reimburses the employer for claims.
3 This is the variable portion of level-funded health plans, but also where the most cost savings can occur. Unfortunately, this is an area where level- funded health plans provide opportunities
the expense of an employer. As with a fully insured plan, the insurance carrier estimates the cost that an employer’s group policy will charge for the year (including all four components) and then divide that
As an employer offering health loyees, it is important to explore and understand all of the options that are available to you. Many employers come to their agent for guidance about their assets, their future, and recommendations for which plans are right for them. As someone who counsels clients and prospects, I’d like to explain an option that is not often discussed, but could business: a level-funded plan.
A level-funded health plan, also known
as a partially self-funded plan, is a health insurance plan that combines the cost savings and customization aspect of a self- predictability of fully funded plans. There’s growing interest in this type of plan because it helps with cost predictability. Level-funded health plans have recently been attracting more attention among smaller employers because there is little to
no risk involved and they are exempt from Affordable Care Act (ACA) requirements.
Level funding is a form of self-insurance because an employer pays a steady fee each month. Employers will still contract with insurance companies in a level- funded plan, but they take on more of
have regular and predictable plan costs, while only paying for the health care costs actually incurred by employees.
In the small group market, premiums
are community-rated, meaning small businesses in a geographic area or community become a larger, diverse group. This larger group spreads out the health care costs incurred by the carrier. With level-funded plans, the premium payment amount depends only on the health of the company’s employees instead of including health data from workers at other businesses. So, a company with a
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