Why Group Level Funding

Level funding health insurance offers businesses a way to control healthcare costs while maintaining predictable monthly payments. It combines the benefits of traditional insurance with the flexibility of self-funding. Here’s a breakdown of how it works:

At the end of the plan year, if the total employee medical claims are less than the amount set aside, the employer may receive a refund for the surplus. This reallocation of unused funds is one of the key advantages of level funding, as businesses can benefit from managing claims efficiently. Conversely, if claims exceed expectations, stop-loss insurance will cover the excess.

 With level funding, businesses make fixed monthly payments that include:

• Claims Funding: Money allocated for employee medical claims.
• Administrative Costs: Fees for managing and processing the health plan.
• Stop-Loss Insurance: Protection against high, unexpected claims.

This predictability in payments allows businesses to budget with certainty, without the unpredictability of fluctuating claims month to month.

Level funding means that the employer pays for actual medical claims, up to a set limit. This is in contrast to fully insured plans where the insurance company bears the full cost of claims. If claims are lower than expected, the employer may benefit from the leftover funds (as mentioned in the year-end reallocation).

To safeguard against high-cost claims, stop-loss insurance is included in the plan. This ensures that if claims exceed a certain threshold, the insurance will cover the additional expenses, protecting the employer from financial strain.

One of the major advantages of level funding is the access to detailed claims data. Employers can see where their healthcare dollars are going and make informed decisions about plan adjustments and employee healthcare needs.

Level funding was traditionally only an option for larger companies, but it’s increasingly popular with small and mid-sized businesses seeking to balance cost efficiency and flexibility.

Year-End Refunds Employers may receive a refund if claims are lower than expected.

Predictable Costs

Fixed monthly payments ensure budget stability.

Transparency

Employers have access to detailed claims data.

Stop-Loss Protection

Safeguards against high, unpredictable claims.

Control

More flexibility in plan design and cost management.

Level funding health insurance provides businesses with more control, transparency, and the potential to lower costs through refunds, all while maintaining protection from high claims.