Making Sense of Cost-Effective Health Insurance Options for Your Business
When it comes to providing employee benefits, group health insurance is a crucial consideration for business owners and HR representatives. As a small business insurance broker, we understand that finding cost-effective options is a top priority. Let’s delve into two popular choices: Level and Fully Funded Group Health insurance plans. We’ll break down what each of these terms means and discuss the pros and cons, empowering you to make an informed decision for your company.
Understanding Fully Funded Group Health Insurance
Fully Funded Group Health insurance is a traditional approach where the business pays a fixed premium to an insurance carrier. The amount is pooled into a larger sum of money to pay claims across a group of employers. The premium covers the cost of providing healthcare benefits to employees. The insurance carrier assumes the financial risk associated with claims and expenses incurred by employees.
Pros of Fully Funded Group Health Insurance:
1. Simplicity: The insurance carrier handles claims processing, and administrative tasks,
saving you time and effort.
2. Lower Administrative Work: The insurance carrier assumes the responsibility for complying
with most regulatory requirements and managing plan documents.
Cons of Fully Funded Group Health Insurance:
1. Limited Flexibility: Fully Funded plans often come with less flexibility in plan design and customization, as the insurance carrier sets the terms and coverage options.
2. Potentially Higher Costs: Premiums for Fully Funded plans may be higher compared to Level Funding due to the insurance carrier’s risk assumption and administrative costs.
Understanding Level Funding Group Health Insurance:
Level Funding is a hybrid approach that combines the best aspects of self-funding and fully insured plans. With Level Funding, the business pays a fixed monthly cost that includes both a premium for a stop-loss insurance policy and a claims fund. The amount paid is a reflection of estimated doctor and hospital costs for an employer’s group of employees. At the end of the year, the total monthly costs are revisited and reviewed against the total amount paid out. Any leftover amount is then split between the insurance company and the employer, and the insurance company retains a percentage for administrative costs. Understanding Fully Funded Group Health Insurance:
Pros of Level Funding Group Health Insurance:
1. Cost Savings Potential: Level Funding offers the opportunity to save money on premiums since you only pay for actual claims and administrative expenses, rather than a fixed premium that may overestimate costs.
2. Customization: You have more flexibility to tailor the plan to meet the unique needs of your business and employees, allowing for greater control over plan design.
3. Transparency: Level Funding provides visibility into your claims data, enabling you to identify trends and make informed decisions to manage costs effectively.
Cons of Level Funding Group Health Insurance:
1. Potential Risk Exposure: While the stop-loss insurance policy protects against catastrophic claims, upon renewal rates may not be as attractive as once were based on claims made.
2. Administrative Responsibility: With Level Funding, you assume a greater administrative
duty, including gathering detailed census data and having associates complete a questionnaire.
When considering group health insurance plans for your business, both Fully Funded and Level Funding options have their merits. Fully Funded Group Health insurance offers simplicity and predictable costs, while Level Funding presents potential cost savings and customization opportunities. As a small business insurance broker, we can guide you through the decision-making process, considering factors such as your budget, risk tolerance, and employee needs.
By understanding the pros and cons of each option, you can make an informed choice that aligns with your business goals and enhances employee satisfaction and retention. Remember, Boxelder is here to assist you in navigating the complex landscape of employee benefits. Contact us to discuss your specific needs and find the right group health insurance plan for your business.