For most employers, the concerns about health care costs have only intensified due to the events of the past year. This is causing some business leaders to explore various funding options to maximize their healthcare dollars.
Fully insured health plans have been a long-time favorite for the peace-of-mind they offer. But there’s a growing frustration with the high price tag for that peace-of-mind. The notion of moving to a self-insured plan, however, is just too daunting for some — especially given the lack of predictability, potential risks, and impact on cash flow.
If you desire the advantages of a self-insured health plan, but need a little more financial certainty for your budgeting concerns, level-funded health plans might be the steppingstone you’ve been looking for. Level-funded plans use a hybrid approach that allows small employers to take advantage of the financial benefits and plan design flexibility that a self-insured plan offers while also retaining the lower risk and stable cost features found in fully insured plans.
With a level-funded plan, an employer pays a preset monthly amount to the health insurance carrier to cover the monthly costs for:
If, at the end of the plan year, total claims costs are greater than the claims, the carrier and/or stop-loss coverage will cover those extra costs—meaning the employer is 100% protected.
On the other hand, if total claims costs are lower than the expected, the employer can typically experience one of two things based on the agreed upon contract:
Note: Plan administration and stop-loss premiums are not refundable.
There are numerous factors to consider when selecting a health plan. It comes down to weighing the pros and cons for your company, such as:
Level-funded plans may position you to have more control over one of the largest expenses in running your business. A health plan built to meet the unique needs of your business positions you to reap the benefits of cost containment, wellness activities, and improve your ability to attract and retain talent.
If you are interested to learn more about the various funding arrangements and discuss which may be best suited for your company, contact LoVasco.
This article is for educational purposes only. The tax and legal references attached herein are designed to provide accurate and authoritative information with regard to the subject matter covered and are provided with the understanding that LoVasco Consulting Group is not engaged in rendering tax or legal services. If tax or legal advice is required, you should consult your accountant or attorney. LoVasco Consulting Group does not replace those advisors.
Securities and Investment Advisory Services offered through M Holdings Securities, Inc., a registered broker dealer and Investment Advisor, member FINRA / SIPC. LoVasco Consulting Group is independently owned and operated.
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