How Small Businesses Can Reduce Health Insurance Premiums with Level-Funded Plans

How Small Businesses Can Reduce Health Insurance Premiums with Level-Funded Plans

 

Health insurance expenditures for small businesses have been rising, posing significant challenges, especially for companies with fewer employees. However, level-funded health plans are emerging as a promising alternative that can help smaller organizations manage costs more effectively. Although I have been working with level-funded plans since the late '90s, they are becoming mainstream and can positively impact your spending.

 

Understanding Level-Funded Health Plans

 

Level-funded health plans combine features of fully insured plans with the cost-saving potential of self-funding. Here’s a breakdown of how they function:

 

• Businesses pay a fixed monthly fee, which includes administrative expenses, stop-loss insurance (to limit financial risk), and funds for claims.
• Should the actual claims be less than anticipated, businesses receive a refund at the end of the policy year. This approach contrasts with traditional plans, where premiums typically increase each year without the possibility of a refund.

 

Reasons for Small Businesses to Consider Level-Funded Plans

 

Several key points highlight the advantages of level-funded plans:

 

• Significant Premium Reductions : Businesses with healthier employee populations may reduce premiums by 30–50%, with some experiencing up to a 50% decrease when switching from traditional plans.
• Accessibility : Level-funded plans are now available to groups with as few as 4 employees, expanding options for smaller businesses.
• Cost Control Based on Performance : Unlike traditional small group insurance, which pools risks and often results in inflated premiums regardless of an individual team’s health status, level-funded plans allow companies to pay based on their own claims experience.
• Surplus Refunds : If a business incurs fewer claims than expected, it can receive refunds, providing additional cash flow that can be reinvested in the business or employee benefits.
• Compliance with ACA Requirements : Level-funded plans meet the criteria set by the Affordable Care Act and include essential health benefits, ensuring quality coverage.

 

Who Should Explore Level-Funded Plans?

 

Level-funded plans are well-suited for:

 

• Small businesses with 4 to 100 employees.
• Workforces that are generally younger and healthier.
• Employers facing annual premium increases of 10–20%.
• Organizations seeking greater cost control, transparency, and flexibility.

 

While they may not be ideal for companies with frequent high claims or chronic health conditions, many still find them worth exploring with the guidance of a knowledgeable broker or advisor.

 

Steps to Get Started with Level-Funded Plans

 

To begin exploring level-funded plans, consider the following steps:

 

1. Research Options : Not all level-funded plans are identical. Look at various carriers and plan designs to find the best fit for your business.
2. Inquire About Stop-Loss Coverage : It’s essential to understand this protection against high claims and know the specifics of your coverage limits.
3. Request a Risk Quote : Many providers can offer a preliminary quote based on a quick analysis of your employee demographics and health profile.
4. Clarify Refund Terms : Understand the rules surrounding refunds for unused claims dollars, as some plans may keep these amounts while others may return them to the business.

 

*We strongly advise against reviewing the street rates that carriers present to you. In 95% of cases, these rates fluctuate and often increase significantly. In Texas, it's essential to have your claims reports prepared. The Lone Star State provides access to the invaluable HB2015 report, which will give both you and the carrier a comprehensive understanding of claims history.

 

Conclusion

 

Level-funded plans could be the game-changer your small business has been waiting for! If you're tired of unpredictable premium hikes or feel trapped in the small group market, these plans can give you the control you need over your health insurance costs. The best part? There's incredible potential for savings, making them ideal even for smaller teams.

 

Now is the perfect time to connect with your broker and explore the market. Our expertise in level-funded plans and the carriers that offer them sets us apart. The risk of diving into the level-funded space is minimal, and if you haven’t started exploring this option, you might be leaving money on the table!

 

When you're ready to take the next step, visit us at www.trustbearbenefits.com. Let’s chat about how level-funded plans can benefit your business. We’ve seen rates drop by half for some groups—imagine what that could mean for you!