The best way to answer the question “What is level funding?” is to break it into two sections:
- Define level funding.
- Understand level-funded plan design advantages for small business owners.
Level funding is a type of self-funded plan which provides employers with predictable (level) monthly payments, which is applied toward the aggregate and specific stop-loss premium, as applicable, administrative and claim prefund account regardless of claim activity. This allows for better budgeting and peace of mind.
Small- to mid-size employers fund their maximum liability through 12 equal monthly payments based on consistent enrollment, enhancing the employer’s ability to budget.
About Stop-Loss Insurance
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Employers prefund an account to pay covered claims incurred by their employees and dependents under their self-funded health benefit plan. To help minimize risk and protect their business from large, unexpected claims, employers purchase stop-loss insurance. Stop-loss insurance pays covered claims that are more than what was funded, or that exceed a specific amount. There are two types of stop-loss insurance: aggregate and specific.
- Aggregate stop-loss insurance protects the employer from unusually high overall claims.
- Specific stop-loss insurance protects the employer from unusually high claims of a particular covered person.
When covered claims are paid out of the claim prefund account, one of two things can happen. If covered claims are:
- Less than what was funded, employers may receive the surplus either as an administrative fee credit or cash at the end of the year.
- More than what was funded, stop-loss insurance pays the balance so the employer doesn’t have to.
Self Funding for Small Employers
There are many advantages to self funding for small employers. According to a MetLife study, 81% of employees at small companies (2 to 99) see medical (health) insurance as a must have.1 As healthcare costs continue to rise, tailoring a benefit package to meet the needs of the individuals on the plan while having access to review claims reporting, employers can feel more in control of where their money is going and understand how it is being spent.
- Level funding in connection with a self-funded health benefit plan can be less expensive than a fully insured plan.
- Level funding provides employers with predictable (level) monthly payments, regardless of claim activity, allowing for enhanced budgeting.
- This type of program allows smaller employers to provide a flexible benefits package typically available only to larger groups.
- At the end of the plan year, if the employer’s claims are lower than expected there is potential for a refund/credit.
- Peace of mind when combined with stop-loss coverage.
- Claim utilization reports are available throughout the plan year, providing transparency of how healthcare dollars are spent.
It should come as no surprise that self-funded health benefit plans continue to grow in popularity with small- to mid-size employers. According to a Kaiser study, 42% of small firms report that they have a level-funded plan, a much higher percentage than the previous two years.2
Level-Funded Programs
Trustmark Small Business Benefits offers self-funded, level-funded programs. Our plan designs can be uniquely designed for small- to mid-sized groups to help employers save on health benefit costs without compromising quality of benefits and coverage.
We offer both major and non-major medical plan designs, reference-based pricing options, a team of Trusted Member Care specialists to assist employers and their employees . Additionally, our knowledgeable, dedicated sales contacts help every step of the way, including building creative plan designs for your clients.
Our plan designs offer cost-saving servicesto help employees make more informed choices that may lead to savings for the employee and the plan. These services include:
- A quality and cost transparency tool
- A medical second opinion service
- Telemedicine for non-urgent medical care, dermatology and mental health support
- An optional health advocacy service and lifestyle management health improvement program
