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Level Funded Health Plans versus Fully Insured Group Health Plans - Determining The Best Plan

Most employers know that providing a competitive benefits package which includes health insurance is a key factor to potential new employees as well as employee retention. As employers are looking for ways to provide a group health insurance plan to meet the needs of their employees, wading through the different options can get complicated. Let’s take a look at two options:

  • Level Funded Health Plans

  • Fully Insured Health Plans

Level Funded Health Plans

Level funded health plans are increasing in popularity and rising to the top as a solution to help employers reduce premium costs and still offer great plans to employees. But how does this plan work?

As the name suggests, a level funded plan will have a fixed or level monthly cost that includes:

  • Administrative Costs (includes a Third Party Administrator)

  • Individual Stop Loss Coverage

  • Aggregate stop loss coverage

  • A paid claims fund held by the level funding issuer which covers the cost of the group’s anticipated claim costs

Other points of interest with a level funded plan:

  • Potential significant savings in premium costs

  • Many available plan options

  • The option to receive a refund if the claims for the plan year are lower than expected. The insurance company could refund part (or in some cases, all) of the unused funds back to the employer.

  • An option for smaller employers (under 50 employees) as well as those over 50

  • Great option for groups with a healthy employee pool

  • The stop loss carrier is responsible for large claims above the claims fund

Fully Insured Health Plans

A fully insured health plan is the more traditional approach to group health benefits that employers offer to their employees. With a fully insured plan:

  • The employer pays a fixed premium to the insurance carrier

  • The premium is fixed for a year based on the number of employees

  • The insurance carrier is the administrator and collects the premium and pays any claims (based on the coverage benefits)

  • The insurance company assumes the financial and legal risk of loss if claims exceed projections

Other points of interest with a fully insured health plan:

  • Premiums can be high

  • The better option when an employee pool is not healthy

  • Small or large groups can enroll in fully insured plans

  • Many available plan options

Finding The Right Fit

Level funded health plans and fully insured health plans are both great options for employers to offer health benefits to their employees. But which plan is right for your company? It depends on your group. Contact me to discuss these two options in detail and I’ll work to help you find the solution that is best for your company.

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