Employers with healthy workforces are paying needlessly high health care costs, which is why many of them trust us to self-fund their health plans. After all, employers that choose self funding retain savings from things like unused care, utilizing custom provider networks, and smarter referrals.
However, the uncertainty of self funding can be a big leap for some employers. C-suite leaders often enjoy the predictable premiums baked into traditional health plans – even if they’re higher than ever.
And although self funding at The Alliance can save employers 15-30% on their health care costs, it can take a few years to see those significant savings. Self-funding also requires employers to manage their prescription benefits and hire a Third-Party Administrator (TPA) to administer their employees’ health benefits.
Employers looking to “get their feet wet” with self funding can look to a level funded health plan as a midway point.
What is a Level Funded Health Plan?
A level funded health plan is an insurance arrangement in which an employer pays a health carrier a set monthly payment to cover the estimated cost for expected claims, administrative costs, and stop-loss insurance premiums.
If actual claims are lower than expected, the employer receives a refund for unused dollars at the end of the plan year. If actual claim costs are higher, the carrier makes an end-of-year adjustment to increase the premium on the employer’s stop-loss insurance.
What is Stop-Loss Insurance?
Stop-loss insurance (also known as reinsurance) limits the employer’s financial risk in the case of catastrophic claims that would otherwise deplete or exceed the health fund. Stop-loss is crucial in self-funding because it limits the employer’s risk for both specific (individual) and aggregate (entire patient population) claims.
The cost of your stop-loss insurance will vary based on historical claims data, the age and number of your employees (and their family members), and other factors.
The Benefits of Level Funded Health Plan
Level funded health plans are a great way to limit an employer’s risk while introducing them to the benefits of self-funding. Here’s four reasons why:
Predictable Expenses: Employers that switch from the fully insured model get to keep the predictable expenses they’ve grown accustomed to while reaping the rewards of unused care.
Lower Administrative Burden: The insurer typically covers all the TPA, pharmacy benefits, and stop-loss duties, which means it’s a one-stop solution for your business.
Health Claims Rebates: Employers that have healthy, engaged workforces can stand to save a significant sum of money at the end of the plan year.
Data for Future Savings: Employers can use their level funded data to plan for and optimize a self-funded plan for even more cost-savings in the future. (Fully insured employers do not have access to their data.)
So, What’s The Best Health Plan for Your Business?
Level Funded Health Plan:
Employers with a level funded health plan enjoy predictable payments and savings on unused care, but do not benefit from control over their benefit plan design, cost-containment strategies, TPAs, Pharmacy Benefit Managers (PBMs), or their network.
Although level funded health plans are limited in their customization, they still offer employers with a lower appetite for risk to take self-funding for a spin.
Self Funded Health Plan:
Highly engaged employers with healthy workforces who want total control over their health care costs – and have leadership’s buy-in – choose self-funding.
The Alliance takes self-funding a step further by providing unique savings potential through custom provider networks (Smarter Networks℠) and deep data analysis (Smarter Health℠) that guides unique steering opportunities.
To learn more about level funded health plans, self-funding, and how The Alliance can help you move on from your traditional, fully insured health plan, contact us!