Introducing Level Funding:
Level funding is an option that can accompany a self-funded plan, providing support for employers in their health coverage budgeting efforts. With level funding, employers pay a fixed amount each month to a carrier. This amount includes administrative and other fees, the maximum expected claims based on underwriting projections, and embedded stop-loss insurance.
Advantages of Level Funding:
- Cost Savings: Unlike fully insured plans based on community rates, level funding allows you to pay only the actual claims and an administrative fee, potentially resulting in significant cost savings.
- Refunds: If the amount set aside each month exceeds the claims utilized, you receive a refund of the surplus at the end of the year, avoiding the loss of unused funds.
- Cash Flow Management: Level funding ensures a smoother cash flow, as claims are distributed evenly throughout the year, reducing the impact of a high claim early in the year.
- Detailed Reporting: Many level funding plans offer utilization trend reports, helping you identify areas of overspending and optimize employee benefits.
- Fewer Regulations: Level funding plans are subject to fewer governmental regulations compared to fully insured plans, allowing for more flexibility and tailored solutions.
Disadvantages of Level Funding:
- Administrative Fees: Level funding comes with administrative fees that may offset some of the cost savings, requiring careful consideration when choosing a funding option.
- Claims Payment: Employers are still responsible for paying claims, with level funding providing convenience and stop-loss coverage for security.
- Contract Terms: Understand the contract’s terms, especially how they may impact businesses of different sizes, as well as the minimum or maximum employee requirements set by level funding plans.
Making Your Decision:
When considering a self-funded health plan, level funding is an option worth evaluating in light of your company’s cash flow, risk tolerance, employee numbers, and budgeting preferences.
Contact DSP Insurance Services for more information about coverage options and to discuss the best approach for your company’s unique needs.”
