Unleashing your Inner Control Freak
In a traditional fully insured health plan, your company pays a premium to an insurer, based on the number of employees enrolled in the plan.
In a traditional self-insured health plan, your company pays claims on behalf of employees, with stop-loss financial protection to set maximum monthly costs.
Question: Which option is better?
Answer: Whichever option controls your costs better.
Caveat: Level-Funding might be your gateway drug to a better outcome, even if it doesn’t cost less. (hint: it often does cost less)
So, how does level-funding work?
Our friends over at CodeSixFour have a 5 step overview that really explains Level-Funding so well, we will just reference them directly:
- Payments don’t fluctuate: a key difference relative to traditional self-funded plans (and the source of the name “level funded” plans), the monthly costs are fixed, based on the number of covered employees and cover all claims, premiums and fees
- Excess surplus credit: if the actual claims your employees experience are less than expected, the employer sponsoring the plan receives a credit, which is typically money paid back directly
- No costs after termination: typically in a self-funded plan, there is a “run out” period where claims incurred during the contract period are still paid after you terminate a plan. However, in a level-funded environment there are no additional expenses after termination
- Claims reports and insight: understanding your claims experience and engaging employees to better manage their health care be a huge cost savings for employers. With level-funded plans, your company typically will have reports that track where and how claims dollars are spent
- Custom plan design: level-funded plans are governed only by ERISA, and this allows a great deal more customization in the plan design and coverages included, as well as the use of account-based health plans
Did you catch the most important point?
If your answer was “Claims Reports & Insight”, you are a winner.
The downside of a Fully Insured insurance plan is the inherent lack of interest on both yourself and the insurer to share claims data.
For you, it doesn’t truly matter. If you have a bad claims year or two, the big bucks are absorbed by the big bad insurance company.
For them, releasing transparent data is a waste of time. Something akin to giving away all of their trade secrets.
It’s time to go a little OCD
Unleash that little voice that has been beaten into submission. Yeah, that one that says there must be a better way.
Become Obsessive about Controlling your Destiny. Go OCD for your health plan.
Download our Guide to Self Funding
About the author: An avid learner and resourceful leader with a passion for problem solving, Bret is a calming force in the chaos and fast paced evolution of health insurance, employee benefits, and the growing burden of regulatory compliance. He helps people develop the confidence to see beyond the problem at hand and start to re-imagine their goals. Whether he’s helping a client or a colleague, Bret believes a successful interaction is one that allows us all to dream a little bigger when we’re done.
About AG Insurance: AG Insurance (www.agiainc.com) helps employers and their employees with solutions focused on positive organizational impact and improved employee experiences.