Is Level-Funded Health Insurance Right for Your Business?

Level-funded health insurance is becoming more popular among small and mid-sized organizations, allowing them to control healthcare costs and offer better benefits. This method of benefits funding allows employers to stay within their budget for healthcare costs while offering comprehensive insurance to their workers. So, is level-funded health insurance appropriate for your business? Let's discuss the potential benefits and setbacks of this funding strategy. For a full explanation of how these plans work, see what a level-funded health plan is. 

Don’t hesitate to contact a KBI Benefits representative for personalized employee benefits assistance. 

Understanding Level-Funded Health Insurance

Level-funded health insurance is a practical choice for small businesses when addressing healthcare costs without neglecting the health needs of the employees. With this approach, the employer pays a fixed monthly amount, which is used for claims, administration, and stop-loss. When claims are lower than anticipated, the employer may receive a portion of the surplus, depending on the contract, enabling businesses to recover some funds.

This arrangement not only assists in tightening up your small business’s budget, but it also ensures that employees have access to the benefits they’re looking for without fearing rising insurance costs. As an increasing number of smaller employers seek better health insurance coverage to attract better talent, it is important to understand how you can improve your benefits without ballooning your budget. 

Cost Benefits of Level-Funded Plans for Employers 

One of the significant benefits of level-funded health plans is the potential reduction in health benefits costs for an employer. While results vary, KBI Benefits has helped small to medium-sized businesses save 15-25% on their employee benefits expenses, which makes these plans a prudent option for budget-conscious organizations. 

As the employment sector gets more competitive, level-funded plans are likely to be used by more companies to maximize the company’s ROI on their employee benefits. With the right combination of quality benefits and affordable rates, businesses see lower employee turnover and more qualified applicants looking to work for them, which helps them grow more sustainably. 

How Stop-Loss Insurance Supplements Your Level-Funded Health Insurance 

Stop-loss insurance is a valuable asset to employers who have adopted level-funded health plans. With stop-loss insurance, the company can narrow its risk of incurring prohibitively expensive healthcare costs in the case of an employee requiring a significant amount of care, since claims above a set limit are covered by the stop-loss policy. As a result, businesses can know their health costs' upper bounds while still providing competitive employee benefits.

In addition, stop-loss coverage helps ensure that a single large claim doesn't disrupt your company's overall finances. As healthcare costs keep rising, stop-loss is an essential part of any level-funded plan.

Comparing Level-Funded vs. Fully Insured Health Insurance

Unlike fully insured plans, which have fluctuating premium increases every year that make it difficult for employers to manage healthcare costs effectively, level-funded plans offer a set monthly amount that makes budgeting more predictable. This is advantageous for companies who need to provide high-quality medical care while simultaneously being able to forecast the potential cost. Compared to fully insured options, employers may save 15–25% when using level-funding without compromising the quality of their benefits. For a comparison with self-funding, see level-funded vs self-funded health plans.

Signs Level-Funded Health Insurance Is Right for Your Business

Level-funded health insurance tends to be a strong fit when:

• Your workforce is relatively stable and healthy
• You want more claims data and cost transparency than a fully insured plan provides
• Your budget can handle a fixed monthly cost with refund potential, rather than guaranteed savings
• Your renewals have risen even though your claims have stayed low
• Level-funded options are available for your group size and state

It may be less suitable if your group has several known high-cost conditions, or if you prefer the simplicity of a fully insured plan. Benchmark your current plan to see how level-funding compares.

Is Level-Funded Health Insurance Right for Your Business?

By understanding the unique features that level-funded health plans bring to the table, small and mid-sized businesses can manage their healthcare expenditures and improve employees' satisfaction all at once. Explore our level-funded group plans, or speak with a KBI Benefits broker today and discover how your business can start saving on better employee benefits.