Level Funded Health Plans: Why They Might Be Right For Your Small Business

In Chamber Blog by admin

Amy Turner, Innovation Health Chief Operating Officer and Executive Director
Health plan prices for small businesses have been on the rise. Since the passage of the Affordable Care Act (ACA) in 2014 many are looking for new solutions to control costs and create more flexibility for employees.
What level funded plans do is create a new plan option for small businesses that enroll five or more employees. Because they sit outside of the community rating provisions of the ACA, these health plan options can price risk appropriately while offering several other benefits for small businesses. 
If you are a small business looking for a new health plan option, here is what you need to know.
Cost Savings
In today’s ACA environment we have what is called pooled risk. This means that many businesses may be paying more for their healthy group than needed based on that specific group’s risk composition. These new plans have the potential to save businesses as much as 25% a year which could result in savings as high as $72,000.[1] 
And employers also get the added benefit of multiple plan designs, greatly improving employee choice. With a diverse workforce reflecting different age groups and health plan needs the ability to pick from multiple plan designs not only benefits employers but empowers their employees to choose what is right for them.
Adjusting Utilization 
Because level funded plans are created and operated differently employers may have the ability to get money back at the end of the year. With the potential to receive a surplus at the end of the year, there is a vested interest in changing utilization rates inside a company.
In the past, when paying fully insured plan coverage, there was little incentive for employees to get healthier or exercise. Under the level funded plan designs, because businesses can see a financial surplus at the end of the year (changes in utilization of services will affect the potential for a surplus), wellness and employee engagement to help employees stay healthy will have an even greater impact.
Today, 50 percent of the businesses that buy level funded plans get money back at the end of the year. What employers should know is that if they are interested in exploring these plans, they have a few options. The first is talking with their broker to see if these plans might benefit their employees. The second is that they don’t have to wait until their current fully-insured coverage renews to change their coverage.  Even if a company renewed their insurance a few months ago, new options might be able to save them more money, now.

[1] Actual results may vary. Illustrated savings are calculated by comparing total costs for a self-funded Innovation Health Funding Advantage plan case with narrow network coverage and the premiums for Affordable Care Act fully insured small group case with broad network coverage (calculated January 2017). Not all groups meet the eligibility criteria for Innovation Health Funding Advantage, including underwriting requirements related to the stop loss insurance. Innovation Health is not a provider of health care services and, therefore, cannot guarantee any results or outcomes. Health benefits and health insurance plans contain exclusions and limitations. Information is believed to be accurate as of the production date; however, it is subject to change.