When it comes to providing employee benefit plans, businesses often face the challenge of balancing cost control with comprehensive coverage. Traditionally, major carrier fully insured plans have been the go-to option, but they may not always offer the best solution. Enter level funded benefit plans, an increasingly popular alternative. In this blog post, we’ll explore the advantages of level funded benefit plans over major carrier fully insured plans, highlighting the benefits they offer to businesses.
What Are Level Funded Benefit Plans?
In the complex world of employee benefits, businesses have more options to choose from than previously offered, including fully funded plans from major carriers, self-funded plans, and level funded plans. Some companies opt for level funding as an interim step between fully funded major carrier plans and self funded plans.
In a level funded benefit plan, the employer sets aside funds to cover administration costs, claims benefits, and stop-loss insurance each month. At the end of the plan year, the employer is refunded any money left over if claims were lower than expected. Level-funded plans offer the potential savings of self-funded plans, with reduced risk, while offering similar predictability of fully insured plans, but at a potentially lower cost. Read on to learn more about the advantages of level funding.
Advantages of Level Funded Plans
Level funding has certain advantages and benefits in comparison to major carrier fully insured plans.
Cost Control and Predictability
One of the key advantages of level funded benefit plans is cost control. In fully insured plans, employers pay fixed premiums to insurance carriers, regardless of the actual claims experience. This lack of transparency can result in unexpected premium hikes year after year. In contrast, level funded plans allow businesses to pay a fixed monthly fee, which includes claims coverage, administrative fees, and stop-loss insurance. This predictable cost structure allows employers to budget more effectively and avoid sudden premium increases and cost surprises.
Potential Cost Savings
Major carrier fully insured plans are typically priced based on the average risk of the entire pool of insured individuals, which can result in overpayment by employers with healthier employee populations. In level funded benefit plans, employers assume a portion of the financial risk, and any unused funds or surplus at the end of the year can be returned to the employer. This surplus return potential offers businesses the opportunity to realize cost savings based on their actual claims experience.
Customization and Flexibility
Major carrier fully insured plans often come with predefined benefit packages that may not align perfectly with the unique needs of an organization and its employees. Level funded benefit plans provide greater flexibility in plan design. Employers can customize their benefit offerings by selecting coverage options, provider networks, and ancillary benefits that are best suited to their workforce. This customization allows businesses to tailor their plans to their employees’ needs and preferences, ultimately enhancing employee satisfaction and retention.
Increased Transparency and Control
Level funded benefit plans offer enhanced transparency and control compared to major carrier fully insured plans. Employers have access to detailed claims data and analytics, which can help them identify cost drivers, implement targeted wellness programs, and make informed decisions regarding plan design and cost management strategies. This transparency enables businesses to take an active role in managing their healthcare costs and improving the overall health and well-being of their employees.
Reduced Administrative Burden
Fully insured plans often involve complex administrative processes that can be time-consuming and burdensome for employers. Level funded benefit plans, on the other hand, typically include comprehensive administrative services provided by a third-party administrator (TPA) like HealthEZ. These services encompass claims processing, network management, customer service, and compliance support, freeing up valuable time and resources for businesses to focus on their core operations.
The Difference Between Level Funding and Self Funding
While major carrier fully insured benefits plans may seem like an easy, all-in-one solution, they can be frustrating when it comes to plan costs and lack of flexibility, especially for small businesses. However, taking the step to a self funded plan can also feel a little scary and financially uncertain. Level funding as a good in-between step.
As we’ve discussed, level funded plans mean that the employer pays a monthly set amount towards the cost of the plan, including claims and admin costs. Any surplus is returned at the end of the plan term.
Self funded plans means that the employer assumes the financial responsibility of providing the health benefits plan. With self funding, the employer only pays when care is needed, which saves money on unnecessary or unused benefits and annual carrier cost increases. Find out more about self funding with HealthEZ here.
You Have Choices When It Comes to Employee Benefits Plans
While major carrier fully insured plans have long been the standard in employee benefit offerings, level funded benefit plans offer several advantages that businesses should consider. From cost control and potential savings to customization and transparency, level funded plans provide a compelling alternative. By exploring level funded benefit plans and collaborating with experienced TPAs like HealthEZ, businesses can strike a balance between providing competitive employee benefits and managing costs effectively.