Providing employee benefits is more affordable than you might realize!
Fully-Insured Health Plans vs. Level-Funded Health Plans
Pacific Northwest Benefits
As if there weren’t enough questions surrounding the type of health insurance plans you offer your employees, there’s also the question of how to best fund the program. Fully insured, self-funded, and level-funded health plans can be found throughout every industry, but small businesses tend to face more funding challenges with health insurance than their larger counterparts.
While they aren’t required by law to offer healthcare to their employees, many small businesses (as defined by the ACA) nevertheless feel inclined to do so. Some choose to do it simply because they want to take care of their employees, while others do it to strengthen their recruitment and retention strategies. Of course, many employers do it for all three reasons.
Regardless of their intentions, employers who offer healthcare to their workforce know the cold, hard facts: health insurance is still ranked among the most important factors for potential employees in a compensation package. Job-seekers see how volatile the individual marketplace is and understand that the most reliable and cost-efficient way to obtain healthcare is still through an employer.
Because fully-funded health insurance plans tend to be expensive for small businesses, many are turning to level-funded health plans, which blend the economic advantages of self-funding with the financial predictability of fully-funded plans. (Author: Jeff Griffin-JP Griffin Group 2018)
Traditional Fully Funded Health Plan in a Nutshell...
In a fully insured plan, you pay your premium regardless of whether or not you even use your health plan. The insurance company keeps all money paid to them. Usually comes with an automatic rate increase from year to year.
In a level-funded health plan, you pay your premium and if your group has a low claims year, you get money back instead of the insurance company keeping it! Rate increases are not automatic.
Level funded health plans also provide employers with far more flexibility in plan design and are exempt from some ACA regulations. Additionally, level-funded plans give employers access to invaluable data which can inform plan design, such as claims information, unit cost of healthcare statistics, utilization frequency, and prescription data that a fully insured plan carrier will not provide.
Why hasn’t my current broker told me about level-funded health plans?
Good question! Why haven’t they? It’s important that you as business owner understand ALL your options available! Level-funded plans are more complex, and many brokers serving small-group clients have not been trained on their structure, implementation and costs.
Another reason is the momentum of fully insured small-group plans. For many brokers, it is just easier to roll their existing, or fully insured plan, forward another year. This isn’t always to the benefit of the broker, not the business owner!
While a level-funded health plan might not be a good fit for your business, it’s always the first place we start at Pacific Northwest Benefits. We look at ALL options both fully-insured and level-funded to insure you’re getting the best coverage at the best price for you and your employees!
So, the question is why not explore a level-funded plan? With savings of up to 40 percent, protection against extraordinary costs, and the ability to fall back on a fully insured plan, there is very little reason not to do so.
- Cost Savings
- Plan Design