Level funding is a great way to budget and fund your self-funded health insurance plan for your employees. Otherwise, you may not be able to adequately plan financially for the payouts for claims made. This could lead to a host of financial issues and potential legal concerns.
What is Level Funding?
A level funded health plan is an option for funding your self-funded health insurance plan for your employees. Self-funded insurance requires you to hold money aside to cover health-related claims made by your employees. Mismanaging the budget, funding and payouts is all too easy and can be disastrous for your organization. Level funding simply takes the stress out of a self-funded plan. It provides a structure for your organization as you handle employee benefits and mitigates financial risk, among other purposes and benefits.
What Advantages Are There for Employers?
Your employees benefit from a well-managed self-funded plan through level funding. However, a self-funded plan that is not properly managed financially leads to unreliable benefits for employees and a massive headache for the employer. The advantages of a level fund for employers, however, are extensive. By choosing a level fund, the benefits you (the employer) may receive include rates that are based on claims, lower employer (and employee) costs, financial predictability, easier regulation and more flexibility and control over your self-funded plan.
Rates Are Based on Claims
With level funding, the rates are based on your organization’s history of claims. This allows for a more accurate analysis of how much your organization should place into the level fund each month, along with calculating how much the self-funded insurance will cost your employees. By properly calculating your rates by a thorough analysis of the claims history, you can reduce your overall risk and ensure you have the funds necessary to cover claims made by your employees.
Saves Money for Both Employee & Employer
Self-funded insurance often benefits both the employee and the employer. This is especially the case when the self-funded health plan is funded through level funding. This reduces the employer cost through a reliable calculation of how much the company is responsible for claims (on average) each year. It also reduces the cost for the employees as well in a similar manner. Employees may also save money by having their claims adequately covered, along with giving them peace of mind that they can trust their employer to handle claims as they have the budget set aside in advance.
Compensation for Claims Not Used is Returned
There is very little risk involved with level funding. The money you (the employer) put into the fund is to be used for paying claims and nothing else unless specified and directed by the employer. The carrier is not allowed to take the funds for themselves or keep any of the money that is not used for claims. Instead, any surplus your organization has in the level fund is returned to you.
Offers More Financial Predictability
If you are like most business owners, then one of the main goals you have is financial stability and predictability. This refers to predictable revenue, but it is equally important to understand the costs your organization is responsible for, especially if you have a self-fund for your employees. Level funding allows you to have more financial predictability and less risk of a large loss of money due to unexpected claims that your organization is not prepared for.
Third-party employee insurance programs are often riddled with government regulations. This can put a heavy strain and increased liability on your organization. A self-funded plan often has fewer regulations to follow and it is much easier to understand how to comply with all laws and regulations that are relevant to your self-fund. A level funded health plan also allows you to remain in compliance with regulations.
Higher Flexibility Over Other Plans
With level funding, you have more flexibility over your organization’s other plans. This is because the level funded plan provides more financial certainty and allows for reduced organizational costs, which frees you up for a larger budget and the opportunity to potentially take on more risk in other areas.
Speak to The Level Funding Experts
Here at New City Insurance, we take pride in offering a trustworthy level funding service for businesses that have a self-funded insurance plan. We genuinely believe that self-funded plans are the way to go for businesses due to the benefits they offer both the employer and employee, and we are here to help you budget and fund in a responsible and organized manner so there are no setbacks or critical mistakes made in the payment process when a claim is made. If you would like to learn more or start your level funding for your self-funded plan, then reach out to our professional team today by phone or through message.