Introducing a small business employee health plan that pays you back.

Small Business

Introducing A Small Business Employee Health Plan That Pays You Back

Health insurance plans can be expensive for any employer, but small businesses often have a more difficult time obtaining affordable coverage than their larger counterparts.

As a business owner, you may be most familiar with a fully-funded health plan – you pay a premium to the insurance carrier, your rates are fixed for the year, and the cost is based on the number of employees enrolled in the plan each month.  The traditional alternative has been a self-funded plan, which is generally more cost-effective, but leaves you with both the plan administration and the additional risk.

Many smaller employers are turning to a different alternative: level-funded health plans. Designed with small businesses in mind, level funding provides the familiar structure and predictable costs of a fully insured plan, with the economic advantages of self-funding.

How Do Level-Funded Plans Work?

With a level-funded plan, you still contract with an insurance company, but you bear more of the financial risk.  With that assumption of risk, you also retain more control over your employee benefits plan.  So as an employer, you make decisions based on the health of your staff, and what you can afford.

With level-funding, you allocate a certain amount to cover your annual employee health care costs.  This amount is funded through a fixed monthly payment that covers your employee healthcare claims.  If your employees exceed that set amount, you have the ability to revert back to an ACA plan without penalty.  But if claims paid are lower than expected, the insurer reimburses you for the overage.  This annual refund can be particularly beneficial to employers with a relatively healthy staff.

Why Should I Consider A Level-Funded Plan?

Level-funded plans can save you money, while providing your employees with quality coverage, which is why they’ve been gaining popularity among smaller employers.  Level-funded plans also provide flexibility in terms of plan design, are exempt from some ACA regulations, and don’t leave you with the administrative burden.

But there are also some drawbacks.  Because level-funded plans are exempt from certain regulations, insurance carriers can take more liberties in determining your claims expenses.  So, if you’re considering a level-funded plan, it’s probably best to work with an employee benefits advisor who can navigate and negotiate with carriers, and can help map out a plan for your company.

If you already have a small business healthcare plan that’s become too expensive, consider switching to a level-funded plan.  It can provide the potential for cost savings while protecting you from the risks of going it alone.

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