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Songer Benefits, Inc. Blog

All You Ever Wanted to Know About Insurance

Small Business Level-Funded Health Insurance

Level funding for small businesses in West Virginia is an increasingly attractive alternative to conventional funding that can accompany a self-funded plan, improving an employer’s ability to budget its health insurance while reducing Risk. This method has proven most effective with smaller employers whose risk tolerance would result in rates below adjusted community rates mandated by PPACA. With level funding, employers pay a fixed amount monthly to a carrier. This amount typically includes the expense of administrative and other costs and the maximum amount of expected claims based on underwriting, as well as fixed stop-loss insurance. The carrier facilitating the level of funding will pay members’ claims throughout the contract term. Here are the advantages of level funding:  Possibility of Refunds. Suppose its payments exceeded claims at the end of the year. In that case, the employer may receive a partial or full refund (depending on the contractual relationship with the carrier) from the excess paid in monthly claim allotments. It’s important to note that the likelihood of refunds is somewhat low, given the way these products are underwritten and is also impacted by the percentage of the monthly cost allocated to claims funding—limited Risk. Suppose the claims exceeded what was paid into the claims reserve, in most cases (depending on the terms of the employer’s stop-loss insurance).

Many level-funding plans provide detailed reporting on utilization trends, giving the employer important information on where employees may be causing overspending (such as unnecessary emergency room visits instead of urgent care)—regulatory Oversight. Level-funded plans are partially self-funded plans, and therefore freed from state regulation and subject solely to ERISA. Be mindful that stop-loss insurance sold with this funding approach is likely to be still regulated by the state Department of Insurance.