Alternatively funded medical plans: Level-Funded, Minimum-Premium and Self-Funded, make more sense today than ever for all size employers. At one time Self-Funded programs were earmarked for larger employers (250+), or smaller companies, working with Third Party Administrators that were willing to take risk, often with strong cash flow. The market continues to develop and learn from the maturation of alternative funded products and now offers options other than fully-insured to all size employers.
Today we will discuss the employers with 50 to 99 eligible employees, changes to their market segment, and the structure of a Level-Funded product.
Your company has between 50 and 99 eligible employees. You just found out, thanks to the good old “ACA” (Affordable Care Act), that your segment will be considered small group effective 1/1/2016. As a result, most carriers are preparing to move you to a community-rated (uniform rates by age group, sex, and product) platform, that will be age-banded based on each employee and their dependents’ unique demographics.
There goes any strategy that you have ever created! Your cost of health insurance is about to enter the realm of “your purchasing power is only equal to your competition.” If this is the first you have heard about this transition in the marketplace, then let’s talk, today.
I was recently meeting with a prospective client, who subsequently retained our services as their broker, who asked “why should I care? An even playing field seems to be a good thing.” I firmly responded, “because your competition down the road is going to hire us, and we are going to teach them alternative funding, and they will have a lower-cost structure for delivering their health plan. They will have a more competitive health insurance plan attracting or retaining a stronger workforce and/or a lower-cost structure, simply making them more competitive in your industry.”
- A Level-Funded health plan is written on a self-insured chassis, which allows for immediate savings through:
- A decrease in state mandated benefit requirements
- A 1.75% CT State Premium Tax
- Approximately 3.5% in Federal Health Insurer fees
- A Level-Funded product has unique elements to significantly decrease risk that is often associated with self-funded plans through:
- Low individual (catastrophic) stop-loss levels
- 110% of expected claims capped risk
- A Level-Funded product allows you to pay a fixed maximum program cost :
- That is competitive to the fully-insured renewal
- Has fixed rates by tier for the purposes of aligned employee contribution
- With no additional liability when terminating the plan upon renewal (even if you ran poorly)
- Has shared savings if you run well and renew your plan
Let’s say you receive a competitive Level-Funded quote that is equal to, or better than, your best fully-insured alternative. You know if the whole thing blows up, you can just walk away. So why not give it a shot?
Do you really want a one year solution or are you willing to fight for the best outcome and long-term strategy? There is due diligence to be done to insure that your program has the best chance of success
Your Level-Funded premium is made up of 3 components: administrative fees, individual and aggregate stop-loss premium, and claims allowance.
- If you pay too much for administration and/or stop-loss then claims are destined to miss their mark, and there will be no savings to share.
- Are you getting a big renewal increase under the new community rating methodology? This likely means the carrier liked your risk in the past, but the new community rating platform forced the carrier to renew you at the level that reflects the average employer cost.
- Even if you are getting a square deal on administration and stop-loss, does your claim allowance match your likely performance
- What can you do to get your hands on some claim experience?
- Or at least loss ratios, high claimant info and utilization info?
Continued pressure from ACA on health plans, especially fully insured, does not allow the review of self-funding to be just checking it off your list. There are very viable products for all size employers, and purchasers are required to educate themselves about the products, opportunities, and risks. These products are negotiable and knowing how to create the best opportunity to win is incumbent upon you and your broker.
