Level Funded 101

Level Funding is starting to become one of those buzzwords we hear all the time in the insurance industry.  Many insurance experts talk about this becoming the new fully insured model for groups that have a low risk and are tired of over paying in the ACA market.  Because Level funding can get a little tricky, I’ll briefly touch on how level funded plans work and why more and more groups are turning to them. 

To explain level funding on the most basic terms, it is a health insurance plan that is self-insured but acts like a fully insured plan.  Confused yet? Just like a self-insured plan you buy stop-loss insurance and any claims that come up during the year go toward that stop-loss.  The difference is what happens if you go over the stop-loss.  One a self-insured plan the group would be responsible for paying that claim, on a level funded plan the carrier picks up the cost on any claims past the stop loss.  This means your monthly premium will never change throughout the year.

Another advantage of Level Funded plans is that insurance carriers are allowed to fully underwrite these groups.  This means that for companies with less than 50 employees you do not have to settle for the rate card set rates.  This can also be a negative because if you are a small group and a few bad risks your rates could end up being higher than an ACA plan.

We are going to start to see many smaller companies start switching to these types of plans especially as insurance carriers start making these plans more enticing.  I do caution you to make sure you do have a conversation with your benefits consultant as these plans are not made for everyone.