Level- and Self-Funding Expertise from Word & Brown
Level-Funding and Self-Funding are gaining in popularity. And, contrary to what you might think, they are not just for larger groups. The Kaiser Family Foundation Employer Health Benefits Survey found 65% of workers were in a self-funded plan in 2023. Thirty-eight percent of small firms (with 3-199 workers) were in a level-funded plan in the same year.
What is a Level-Funded Plan?
A Level-Funded plan is a hybrid between a fully insured plan and a self-funded plan. It combines cost predictability with potential savings. Costs are fixed with employers paying a set monthly amount – making budgeting easier. If claims are lower than expected, clients could receive a portion of unused funds as a refund at year-end. Businesses also avoid some state premium taxes applicable to fully insured plans. Employers get claims data insights to better manage their health care costs. Increased plan customization gives employers more flexibility than traditional health plans.
What is a Self-Funded Plan?
A Self-Funded plan gives employers full control over their employees’ health care costs. They pay claims directly, instead of paying a fixed monthly premium for insurance. Your clients may save because they avoid certain traditional health plan taxes and carrier profit margins. They also enjoy greater cash flow flexibility because they pay only for actual claims. Customizable benefits give them access to more plan designs, provider networks, and cost sharing. Plus, with more claims data transparency, clients can analyze utilization trends and reduce potential future costs.
Strategic Review & Analysis
Our team of experts will do a strategic review and analysis of potential Level-Funding or Self-Funding products. We’ll determine if your client is a good fit and provide you with an Executive Summary. We’ll help you select the right carrier and plan to match your client’s needs and goals.
Cost Control & Refund Potential
If your client’s claims are lower than expected, they could receive a refund of a portion of unused funds at year-end. Fully insured Affordable Care Act (ACA) plans do not offer this – premiums are paid regardless of utilization. Level-Funding makes budgeting more predictable than Self-Funded plans.
Other Considerations
While Level-Funding and Self-Funding offer many benefits to your clients, it’s a good idea to compare the positive and negative attributes when weighing your client’s options:
- Pros of Level- or Self-Funding
- Cons of Level- or Self-Funding
- Possible Refund: If plan claims are lower than expected, your client could receive a refund of unused funds at year-end. The group must renew, and the surplus is paid in month 15, post run-out.
- Possible Higher Costs: If claims are high and exceed projections, businesses could face increased renewal rates. Some plans may require mid-year adjustments if claims are significantly higher than anticipated.
- PPO Clients Are an Ideal Fit: PPO groups tend to be healthier and are good Level-Funding and Self-Funded candidates. HMO clients could face a substantial rate increase if moving to Level-Funding or Self-Funding.
- Chronic Conditions Risk: Those groups with employees who have chronic health conditions may not see a savings and/or could be declined during the RFP process.
- Underwriting Advantage: Assessing employees’ health risks can reduce rates for healthier groups.
- Industry Matters: Your client’s industry could affect their eligibility for alternative coverage. Underwriting Advantage: Assessing employees’ health risks can reduce rates for healthier groups.
A Growing Opportunity
Level-Funding and Self-Funding are gaining in popularity. And, contrary to what you might think, they are not just for larger groups. The Kaiser Family Foundation Employer Health Benefits Survey found 65% of workers were in a self-funded plan in 2023. Thirty-eight percent of small firms (with 3-199 workers) were in a level-funded plan in the same year.
Contact your Word & Brown rep today to discuss whether moving to Level-Funding or Self-Funding options are right for your clients.