What is a level-funded health plan?
Self-funding with the sharp edges removed: a fixed monthly payment, a claims account, stop-loss cover, and a surplus question.
By Warren Tisdale, Cedar Landing Benefits
Level-funded plans sit between fully insured cover and true self-funding. For a healthy small group they are frequently the cheapest serious option, and they give an employer something fully insured almost never does: visibility of its own claims.
They also come with conditions that deserve to be understood before signing.
How the money works
Your fixed monthly payment is divided three ways: an administration fee, a stop-loss premium, and a claims fund. Claims are paid from the fund. If claims exceed the attachment points, the stop-loss carrier pays, which is what keeps your cost fixed.
If the fund is underspent at year end, the contract determines whether some of the surplus returns to you, and on what timetable. Read that clause; it varies far more than anything else in the proposal.
The underwriting condition
Level-funded plans are priced on your group's own expected claims, which means a health questionnaire or claims history at the outset and again at renewal. A healthy group is rewarded. A group with a difficult year may be re-rated sharply, or declined.
That is the risk being traded for the saving, and it should be a board conversation rather than a footnote.
Who it suits
Typically groups from around ten employees upward with a reasonably healthy census and an appetite for reading a claims report. Below that, the underwriting swing usually makes fully insured the calmer choice.
We price both against the same census and put the difference, and the risk, on one page.
An estimate for planning, not a quote. Medicare and the Marketplace set your real figures.
Have a question this raised?
General writing only goes so far. Your doctors, your medication list and your dates decide what the right answer is for you.
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