Exploring Alternative Funding Solutions

The Issue

During an initial visit to a prospect with just under 100 employees, the group expressed a concern that their current (fully insured) rates were higher than what they should be for what they thought was a healthy employee population. They further surmised that their excessive premiums were probably funding other, less healthy groups within the carrier’s insurance risk pool. However, due to the group’s size, they were not able to obtain any accurate claims utilization data from the carrier to substantiate their belief and that had caused them to fear moving to a self-insured financial arrangement in the past.

Our Solution

We described today’s increasingly popular “level funding” arrangements, which offer the benefits of a self-insurance model without the heavy risk that comes with it. Level funding refers to a plan that falls between a fully insured plan and a true self insured plan, where a company can self-insure, but pay a level fee each month, set by the plan administrator. These plans come fully integrated with both individual and an aggregate stop loss features, providing the group with protection against unexpected and high cost claim charges. As an added benefit, the level funding model is not subject to several key regulations of the Affordable Care Act (ACA) and because they are technically a form of self insurance, the business can avoid payment of the Health Insurance Tax (also a provision of the ACA). Today, these plans are offered by many large insurance carriers as well as Third Party Administrators (TPA’s).

The Result

Not only this business provide us with the Broker Of Record, but we were able to save the group significant premium dollars with slightly enriched benefits during the first year on the plan. At renewal, the administrator compared the amount that was paid to the total claim dollars paid on the employer’s behalf and the group actually received a refund!