When it comes to offering employee benefits, there’s no one-size-fits-all solution. Every employer faces a unique balance between budget constraints, risk tolerance, and the desire to provide competitive coverage. That’s why understanding the spectrum of funding solutions is critical.
Let’s break down each level on the Risk-Reward Spectrum:
- Traditional Fully Insured
This is the most common starting point. Employers pay a fixed monthly premium to a carrier, who assumes all the claims risk. It’s simple and predictable but offers no opportunity to save if claims are low. And worse? It often comes with hidden administrative fees and a lack of transparency that adds significant cost over time.
- Fully Insured with an HRA
Adding a Health Reimbursement Arrangement (HRA) gives employers more flexibility. You’re still fully insured, but you can help employees cover out-of-pocket costs, potentially lowering premiums by choosing higher-deductible plans.
- Minimum Premium
This hybrid approach allows employers to take on a bit more risk by funding claims directly up to a limit, while still paying fixed costs for administrative services and stop-loss insurance. You gain some cost control and visibility without going fully self-funded.
- Level Funding
Level funding offers a fixed monthly cost like a traditional plan, but with a twist: if claims are lower than expected, you may get a refund at year-end. It’s a great entry point into self-funding, combining predictability with potential savings.
- Self-Funded with Stop Loss
Here, employers fund all claims directly and buy stop-loss insurance to protect against high-cost claims. It’s a bigger commitment but also gives you greater flexibility and access to data, which opens the door to smarter, proactive plan design.
- Self-Funded Through a Captive Arrangement
Captives allow employers (often mid-sized or larger) to band together and create their own insurance entity. Risk is pooled across members, offering greater stability, enhanced control, and long-term cost savings. This is one of the most sophisticated funding models available and can be a game-changer for the right group.
So, What’s the Right Solution for You?
As you move across the spectrum, the monthly cost becomes less fixed, but the opportunities for savings and tax advantages increase. Participating contracts, state premium tax savings, and ACA-related benefits all start to come into play.
If you’ve ever felt like your “fully insured” plan is hiding something it probably is. We’re exposing those hidden costs at our upcoming virtual workshop:
🔎 The Hidden Cost of Healthcare
📅 April 17th
💡 Discover how to cut costs without slashing benefits
🔍 Learn where hidden fees live in your current plan
🎤 Hear from real companies who’ve made the shift
