What Is a Level-Funded Plan?

John David Garletts

Level Funded, Healthcare, Health Plans

February 11, 2023

Small group health insurance can be difficult to navigate, time consuming, and costly. From finding the right plan for your clients to the enrollment process, it can be easy to get lost along the way. Although there is a lot to take in, it is important to explore all options as it may help you and your clients save time and money. One of these avenues to investigate for small group health insurance is level-funded plans.

Level-funded plans are a cost-effective way for employers to offer quality health benefits to employees. Below you will find some important information about level-funded plans.

WHAT IS A LEVEL-FUNDED HEALTHCARE PLAN?

In short, a level-funded, or medically underwritten plan is healthcare coverage in which the insurance company reviews an applicant's medical history. This is used to factor how much the applicant will pay and what coverage they are eligible for.

Level Funded plans are often less expensive than other types of group health plans, as they are designed to charge premiums based on the expected healthcare costs of the group. These plans offer more tailored plan pricing in contrast to the more traditional "fully Insured" or "community rated" plans that charge the same premium rates to all individuals in a zip code/region regardless of their health status.

In a Level Funded plan, the carrier assesses the health risk of the entire group based on the medical history of all the individuals covered under the plan. The carrier then uses this information to determine the premium rate for the group as a whole. This can result in lower premiums for healthier groups.

BENEFITS OF A LEVEL-FUNDED PLAN

Cost Savings: Level Funded health plans can offer significant cost savings for employers compared to fully insured plans, as they typically have lower premiums and fewer administrative costs. Employers may also receive an annual refund or premium credit if claims are lower than expected.
Customization: Employers have greater control over the benefits and coverage levels offered to employees, which allows them to tailor the plan to meet the specific needs of their workforce.
Predictability: Level Funded plans provide employers with predictable monthly payments, as the employer pays a fixed monthly amount for claims, with a stop-loss limit in place to limit risk. Regardless of claim amounts, the employer will not be responsible for any more than the monthly set premium.
Transparency: Employers have access to detailed claims data, which allows them to monitor costs and make informed decisions about plan design and employee wellness programs.
Employee satisfaction: Level Funded plans often offer a wider range of benefits and coverage options compared to fully insured plans, which can improve employee satisfaction and retention.
Refund of unused claims dollars: Some Level Funded plans will return a portion or the entirety of any excess claims funds at the expiration of the policy.

REASONS A LEVEL-FUNDED PLAN MAY NOT BE FOR YOUR CLIENT

Post-Claims Underwriting: An insurer can go back later and use a level-funded plan to determine if a pre-existing condition was involved in a claim. If they find this to be true, they may deny the claim and they will have to pay out of pocket.
Health Concerns: If you know your client and their team have a multitude of medical conditions or even if the group consists of a few older folks, you may want to avoid this route all together.

Overall, Level Funded health plans can offer cost savings, flexibility, and customization, while providing greater transparency and risk management than fully insured plans. However, it is important to understand that they may not be the best option for all employers. Because of this, it is crucial to carefully evaluate the benefits and potential risks before choosing a plan. This will enable you and your client to make an informed decision about their health insurance.

COSTS SAVING TOOLS

All level-funded plans through MyHealthily automatically include FREE exclusive access to Prosper Benefits. These tools have a $0 copay, and the services range from TeleHealth services to prescription drug discounts, and so much more, this free benefit will help your client save money by reducing the number of claims.

LET'S TALK

Schedule a call today to learn more about the MyHealthily platform and how you and your clients can save time and money.