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Songer Benefits, Inc. Blog

All You Ever Wanted to Know About Insurance

Small Business Level Funded Health Insurance 5-300 Employees

Level Funded Health Plans For Small Business Group size is 5-300 enrolled employees. Health Plans that are tailored for small/medium businesses in West Virginia. 

A big concern for business owners in Beckley, West Virginia, and surrounding areas, is the cost of health care. Level-funded plans were designed with your business in mind. They're intended to help you save money—and help your employees get more out of their plans, too. Level Funding is a self-funded health plan designed specifically for businesses with 5-300 employees. 

It includes three parts: 

  • A Self-funded medical plan, which pays covered medical expenses of your covered employees and their dependent's. 
  •  A third-party administration agreement (the carrier) for claims processing, billing, customer service, and other administrative services. 
  • Stop-loss insurance helps protect the plan from catastrophic claims by a covered employee. It protects if all claim payments made under the medical plan exceed a specific dollar limit. With a self-funded health plan, you'll have an exemption from most ACA regulations and state insurance mandates and a possible year-end surplus refund if employee claims are lower than anticipated. 

Traditional health insurance is a fixed cost. With traditional health plans, the business pays a fixed premium to the insurance company. Then the carrier pays the health care claims and the administrative expense, sales commissions, and taxes. If the health care claims are more than anticipated, the insurance carrier protects them. However, if the claims are less than expected, the insurance carrier keeps the difference; This means your business doesn't get money back if your employees have lower-than-expected claims.

If the covered claims are lower than anticipated, your plan may get money back at the end of the year with level funding. And if the covered claims are higher than expected, your stop-loss insurance policy covers them. Here are a few additional benefits of self-funding. 

• The plan is a self-funded plan, so your business will make the same monthly payment throughout the contract year. You won't have to pay any additional amount for claims at the plan year's end, even if you have high claims utilization. 

• Self-funded health plans are not subject to most state insurance mandates or state insurance premium taxes, meaning lower costs throughout the year.

Best case: Low claims Utilization. 

Your health plan monthly premium includes the estimated health care claims plus fixed-cost items (administrative cost and stop-loss insurance premium). This is called your health plan's maximum liability, which means you won't be surprised at the end of the plan year with any unforeseen expenses. Part of your monthly premium will go into an account that pays for your covered employees' eligible claims. The monthly funding payments will be compared with the actual claims costs at the end of the year. In the best-case scenario, if claims costs for the year are less than estimated, your plan has a surplus that we often see. After plan reconciliation, an agreed amount of any surplus is refunded back to your plan to use for the following year, and an agreed amount is kept as a deferred service fee.

Worst case High Claims Utilization: 

In the worst-case scenario, the reported claims would be higher than expected. Your health plan is protected by the stop-loss insurance that is already built into your monthly cost. However, because your plan would have paid the maximum liability, you won't have to pay more for additional covered claims at the end of the contract year. Each year could be somewhere in between. But in any case, many businesses can save with an Alternate Funding plan.