Jennifer Schaefer | Founder & CEO, JS Benefits Group
Is a level funded health plan right for your company? In this video, Jennifer Schaefer, Founder & CEO of JS Benefits Group, explains what employers should consider when evaluating level funded health plans and whether this approach may be a fit for their business.
What Is a Level-Funded Health Plan?
A level funded health plan provides an alternative to traditional fully insured group health insurance. Generally, these plans combine characteristics of fully insured and self-funded health plans.
With a level funded plan, an employer typically makes a predictable monthly payment that can include expected claims, administrative expenses, and stop-loss insurance. However, the exact structure, underwriting requirements, and available options can vary by carrier and plan.
For that reason, employers considering different health plan funding strategies should first understand how level funding works.
Is Level Funding Right for Your Company?
A level funded health plan is not automatically the right choice for every employer. Instead, the decision should be based on the company’s specific circumstances.
For example, employers should consider:
- Company size
- Employee demographics
- Claims experience
- Current health insurance premiums
- Plan design
- Healthcare costs
- Employee contributions
- Financial objectives
- Risk tolerance
Ultimately, employers should evaluate their current plan and compare it with available alternatives before making a change.
What Are the Potential Advantages of Level Funded Health Plans?
Depending on the employer and the specific plan, level funded health plans may provide several potential advantages.
For example, these can include:
- More predictable monthly budgeting
- Greater visibility into healthcare spending
- Stop-loss protection
- More flexibility in plan design
- Potential opportunities to manage healthcare costs
However, results vary by employer. Savings are not guaranteed, and the potential advantages of level funding should be evaluated using the employer’s actual plan costs and circumstances.
Therefore, employers should look at the complete financial picture rather than focusing on one part of the plan.
Is Level Funding Right for Every Company?
No.
In particular, employers considering level funded health insurance should first look closely at their current healthcare costs, claims experience, workforce, plan design, financial objectives, and tolerance for risk.
In some situations, traditional fully insured coverage may remain the better option. On the other hand, a level funded health plan may provide an opportunity to approach healthcare costs differently.
Ultimately, the important question is not simply whether level funding is available. Instead, the question is whether it makes sense for your company’s specific situation.
Can Level Funded Health Plans Save Your Company Money?
They can, but there is no guarantee.
For example, potential savings depend on factors such as:
- Claims experience
- Employee population
- Plan design
- Underwriting
- Provider network
- Stop-loss structure
- Employer and employee contributions
- The specific funding arrangement
Because of these variables, the best way to evaluate a potential opportunity is to compare the current health plan with alternative funding strategies using actual employer data.
In addition, a lower monthly premium by itself does not necessarily mean a lower overall cost.
How Many Employees Do You Need for a Level Funded Health Plan?
There is no universal employee-count requirement for level funded health plans.
Instead, eligibility and suitability can depend on the carrier, state, underwriting requirements, employee population, and plan design.
As a result, employers should evaluate the requirements of the specific level funded health plan rather than relying on a single employee-count rule.
Should Your Company Switch to Level Funding?
Not necessarily.
Rather than simply looking for the lowest monthly premium, employers should consider the total cost, financial risk, employee value, plan design, and long-term sustainability of the health plan.
Before making a change, employers should compare their current arrangement with available level funded health plans and other funding options.
Furthermore, an experienced employee benefits consultant can help employers evaluate the alternatives and determine which approach may make sense for their organization.
How JS Benefits Group Can Help
JS Benefits Group helps employers evaluate employee benefits and group health insurance strategies, including level funded health plans, plan design, healthcare cost containment, benefits administration, and employee benefits education.
In addition, our team works with employers to evaluate their current healthcare strategy and identify opportunities to improve plan design, manage costs, and provide meaningful benefits to employees.
Jennifer Schaefer, MBA, ChFC, CLU, RHU, REBC, SHRM-SCP, is Founder & CEO of JS Benefits Group. She works with employers throughout Pennsylvania, New Jersey, Delaware, Maryland, New York, and beyond.
If you’re considering whether level funding is right for your company, JS Benefits Group can help you evaluate your options based on your company’s specific needs and objectives.
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