I'm not sure which saying to kick this article off with, I'm split between "Be careful what you ask for" and "The times they are a changing...". But up until now things just seemed to be getting worse for companies like yours trying to figure out how to manage their employee benefits and the rising costs. It seems like everyday some insurance company is either dropping out of the market or changing their networks so it seems nearly impossible to find a doctor or hospital. When talk of the Affordable Care Act started there were a lot of employers excited at the prospect of finally getting better coverage at a better price. Unfortunately, now that it's come to fruition, that's just not the reality most of us are facing.
Once upon a time, every business had to complete medical questionnaires just to get an insurance company to give them a quote for their benefits. This tended to be a double-edged sword. If your demographics matched up with the insurance company's concept of an ideal group you were rewarded with favorable rates. If something was "off" your company could have ended up paying tens of thousands of dollars more than your neighbors.
Well now, we can have the best of both worlds.
There are a number of insurance companies that are now offering what they are referring to as, Level Funded or Partial Self Funded insurance plans. (These are concepts that have been around along time. But up until now, they were only available for really large employers. Now, groups as small as 5 employees can take advantage of these benefits.)
So How Does It Work?
This concept is so simple, it's genius. Groups complete either individual health questionnaires or simply supply generalized medical information for the entire group (The specifics depend on which insurance company you're working with). The insurance company then assesses what they project the claims will be and prices the coverage accordingly. When next year rolls around and it's time for your renewal, if the insurance company overestimated the claims (Meaning they collected too much money), they will generally give a portion or the overage back to the group in the form of a credit to offset the next year's premiums. If they underestimated, generally they have to absorb the excess claims (A part of the premiums you pay is for something called the Stop-Loss that covers this)
Level funded plans (and generally, most self-funded plans) deliver three primary benefits to small employers: the potential for cost savings, more opportunities for plan customization, and reduced regulations.
To learn more about level funding, take a look at our blog. "What is Level Funding?"
Are you interested in looking more in to level funding for company? Feel free to leave us a comment below, or better yet, click on the FIND OUT MORE button and we'll send you some exclusive insider tips.