What We Do

Level Funded

Small businesses and business owners often worry about the high cost of providing health insurance. Rates for small groups have nearly doubled under the Affordable Care Act, which is a major concern. To address this, the insurance industry has introduced a new type of insurance known as level funding. 

Level funding is particularly suitable for start-ups or small to medium-sized businesses. It combines elements of self-funding and fully insured plans, with both the employer and the insurance carrier sharing the risk, protected by stop-loss insurance against large claims. On average, savings compared to fully insured rates amount to 31%. 

However, not all groups are eligible for a level-funded plan, and cases must be pre-screened to determine eligibility. Under a self-funded medical plan, all covered medical expenses incurred by members are paid for, with a third-party administrator (TPA) handling administrative services. The TPA can be the insurance company itself or an external entity. Groups with low risk can potentially achieve significant savings compared to being fully insured. 

With level funding, the group makes monthly premium payments like a fully insured premium. The difference lies in the breakdown of fixed costs and claims funding. If medical claims are higher than expected, the group is still only responsible for the premium. Conversely, if the group has lower-than-expected claims, they could receive a credit back from the claims fund. 

Level-funded plans are considered self-funded and are not subject to most state mandates or some insurance premium taxes, resulting in potential savings. The plan can yield upfront savings through reduced premiums and additional savings if the company experiences a good claims year. Choosing the right insurance agency is crucial, as different companies have varying risk tolerances in medical underwriting.