Level-Funded Group Health Plans

Save 20%-30% Favorable Claims Experience Bonus Fixed Monthly Cost

A NEW OPTION - Partial self-funding with stop loss protection and fixed monthly costs has recently emerged as an attractive alternative to increasingly-expensive traditional group health coverage for many small and mid-sized businesses. For decades, large (1,000+ employees) companies have taken advantage of the substantial savings available through self-funding. Smaller companies, however, usually did not have the financial resources to take such a risk.

A new generation of partially self-funded plans now enables smaller employers, as well, to reduce their health insurance costs using this technique. These plans are generally best for groups with 50–500 employees but sometimes groups of as low as 10 can benefit.

Features:

• Control – having your own dedicated claim fund means that your plan only pays for the medical expense incurred by your own employees
• Protection – “stop-loss” insurance steps in to pick up the costs of any large, unexpected claims
• Predictability – your contributions to your claim fund are set at a fixed amount (i.e. “level-funded), like a traditional insurance premium
• Transparency – access to reports showing you exactly how your claim dollars are being spent
• Experience Bonus – if your actual claims are lower than the amount funded, cash surpluses are returned to you

How does self-funding save money for an employer compared to traditional insurance?

• Savings on taxes and fees (from 6% to10%)
  • premium taxes vary by state but generally add 2% to 4% to the cost of insurance - contributions to your claim fund are not “premiums” so tax is not due
  • o ACA fees – self-funded plans are not subject to many of the fees imposed on traditional insurers (and passed on to you) by the Affordable Care Act – can add from 4% -6%%
• Fewer mandated benefits required
  • o allows you to design your plan to avoid costly required benefits that your employees may not need or value
• Avoids insurance company overhead charges and profits
• Takes advantage of your employees’ good health – you’re not obligated to help pay the claims of everyone in the insurer’s customer pool

This approach is not for everyone, however. Generally, partial-self funding is best for relatively younger, healthier employee populations. We’ll take a look at the demographics and health status of your group and let you know if this approach might be worth your consideration.