What is Level Funded?
Posted on March 28th, 2018
Level funded has been around for years, and it seems that this style plan has really become a buzz in the industry. But what exactly is a level funded plan? Is a level funded plan really self-funded? What are the risks/advantages? What extra responsibility does my group have if they are on a level funded plan?
Level funded plans give you the ability to have your group fully underwritten instead of rates based purely on age. The advantage is that if you have a healthy group under 50 employees, they are currently receiving no incentive. They are rated the exact same way as your unhealthy group based purely on age, which doesn’t seem fair.
Level funded plans are a potential solution that allows groups to pay premiums based on the risk of the group. The advantage is simple: your healthy group pays less money with no risk. Carriers cover any excess claims, and most have extended runout periods that ensure the group is only responsible for the monthly premium and nothing extra (hence “level funded”). Groups are only responsible for their quoted monthly premium. If they switch at the end of the year, the runout claims are covered and nothing falls back on the group.
Another advantage is that the group has an opportunity to receive money back at the end of the year. If the group doesn’t use the entirety of its funded claims, carriers give a portion of that extra money back to the group to use however they see fit. Throughout the year, groups are sent reports to see how they are tracking toward this surplus. Reporting is a key tool in this style plan, because it encourages a healthy lifestyle throughout the group. And who doesn’t want to receive premiums back at the end of the year?
In a nutshell, level funded groups have no added risk, have the opportunity to pay less in premium (based on health) and could receive premium dollars back at the end of the year. If you are not looking at this option for your clients, I would recommend doing so.
Questions about level funded plans? Contact your Cason Group Sales Representative.
- Matt Black
Sales Representative: North Carolina
Individual Medical Group Operations Sales Representatives
Matt, a University of South Carolina graduate, joined The Cason Group in 2013. He works with advisors to obtain quotes, negotiates with carriers and assists advisors in selling and enrolling new medical and ancillary groups in the Triangle and Eastern regions of North Carolina.firstname.lastname@example.org