A Beginner's Guide to Level Funding: Taking Control of Your Future

Unleash Your Inner Control Freak: Mastering Health Plan Costs

In a traditional fully insured health plan, your company pays premiums to an insurer based on the number of enrolled employees. In contrast, a traditional self-insured health plan involves your company paying claims for employees, with stop-loss protection to cap monthly costs.

Now, the big question: Which option is superior?

The answer is simple: The one that gives you better control over your costs.

But there’s a caveat. Level-funding might be your gateway to a more favorable outcome, even if it doesn’t seem cheaper. Hint: it often is.

So, what’s the deal with level-funding?

CodeSixFour provides a fantastic five-step overview of level-funding:

1. Stable Payments: Monthly costs remain fixed, covering all claims, premiums, and fees. Unlike traditional self-funded plans, there’s no fluctuation.
2. Excess Surplus Credit: If actual claims fall below expectations, the sponsoring employer gets a credit, typically in the form of a direct refund.
3. No Post-Termination Costs: Unlike self-funded plans with a “run-out” period, level-funded plans have no additional expenses after termination.
4. Insightful Claims Reports: These reports help you understand your claims experience and engage employees in better healthcare management, potentially saving costs.
5. Custom Plan Design: Level-funded plans governed by ERISA allow for extensive customization in plan design, coverages, and the use of account-based health plans.

Did you catch the most critical point?

Was your answer “Claims Reports & Insight?”  You hit the mark.

The downside of a fully insured plan is the lack of interest from both you and the insurer in sharing claims data. For you, it doesn’t matter much. The insurer absorbs significant losses during bad claims years. For them, transparency feels like giving away trade secrets.

Now, it’s time to let that inner voice, the one that whispers about a better way, break free. Embrace an obsession with your health plan.