Level-Funded Plans Continue to Grow in Popularity
When it comes to health insurance, Carriers need to keep innovating to meet the needs of their Brokers and Groups. One of the latest trends in health care is the rise in level-funded plans.
While large employers still favor fully-funded plans, more and more small and mid-sized businesses are looking into level-funded options. In 2021, 42% of small firms reported offering a level-funded health care plan. Compare this to just two years ago, when only 7% of firms had level-funded plans, according to the Kaiser Family Foundation Health Benefits Survey.
Why are level-funded plans becoming more popular every year?
Large employers prefer fully-funded plans for the predictability they offer—a set payment each month. But, for small employers, these payments can be a considerable burden. However, moving to a self-funded plan isn’t always appealing. Not every business can manage to pay the total cost of claims which could be $3,000 one month and $10,000 the next.
Level-funded plans offer stability for Groups because they charge the same monthly amount. Carriers set this price based on the estimated cost for expected claims, so their Groups can accurately budget for their annual maximum out-of-pocket health care costs. If a Group’s claim costs are lower than the amount paid at the end of the year, Carriers typically offer a refund. This cost-control feature is one of the most popular benefits of level-funded plans.
When you get down to it, level-funded plans are essentially self-funded plans. However, self-funded plans carry a much higher financial risk each month.
Carriers manage this risk by requiring Groups to purchase stop-loss coverage if claims exceed the annual amount paid. This stop-loss insurance typically covers the gap in a year when a Group’s claims are higher than expected. This way, neither Carriers nor Groups bear the burden when costs rise unexpectantly.
Every Group is unique, and level-funded plans allow Carriers to more easily personalize plans to meet an individual employers' health and budget needs. Some of the possibilities include:
- Plans designed based on one-of-a-kind workforce demographics.
- Benefits tailored to Group size and overall health.
- More options for ancillary products.
- Reduced regulations compared to fully-funded plans.
- Ability to provide Groups with direct access to their health data.
Whether your Brokers and Groups offer level-funded, fully-funded or self-funded plans, FormFire’s innovative software makes it easy to quote and compare products. Contact us for a free demo.