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How Does Level Funding Work?

March 11, 2021, by New City Insurance

office working as a team while having discussing How does level funding workHealth insurance is ranked among the most important factors that employees consider when choosing to accept a job position. Most job seekers understand that the individual marketplace is volatile and that the most cost-effective and reliable healthcare options come directly from employers.
Level funded health plans are suitable for smaller employers that want the customization and cost savings of self-funding with the predictability and financial safety of fully funded plans. Here is a closer look at how does level funding work. So, how does level funding work?

What Is Level Funding?

Also, referred to as partially self-funding, level funding occurs when employers take on extra risk for claims than they ordinarily would with a fully insured plan. In return for this additional risk, employers can enjoy financial predictability and cost savings.

man sitting at his desk looking up How does level fundingworkWhen an employer chooses level funding, the insurance company determines the amount of funding for the year based on its past experience, similar to a self-funded plan.
Employers pay a specified amount per month to the insurance company, some of which is collected via payroll deductions from employees to pay for administrative expenses and other fixed costs. If the total claims and other relevant costs are less than the business’s contributions at the end of the year, the company receives a refund.

The Basics Of Level Funding For Employers

Health insurance costs continue to rise, impacting businesses and their bottom line. To combat against these rising costs, employers are seeking alternatives to fully-insured healthcare coverage to provide employees with more benefits at a reduced cost. Level funding provides a happy-medium, providing the benefits of both fully-funded and self-funded health plans.

Allows For A Level Of Predictability

One of the top reasons why many employers choose level funding is due to predictability. Level funding results in pre-set monthly payments that are based on the number of covered employees and the total cost signifies the maximum that an employer pays. With level funding, payments do not fluctuate based on a company’s claims experience, which can provide peace of mind.

Employers Pay A Set Amount

Under level funding, employers pay a specified amount each month to the insurance company. This amount generally includes the cost of administration, administrative fees, stop-loss coverage and the maximum claims based on underwriting projections. Businesses that want a predictable plan in which they pay a set amount each month may benefit from level funding.

Includes Admin Costs, Stop Loss And Claim Coverage

There are several main components of level funding that should be considered before deciding to switch to this type of insurance. Administrative costs are fixed and charged per employee. These costs do not change regardless of claims. Aggregate stop-loss coverage covers an entire workforce and acts similar to a family deductible for employees. Claims coverage offers the most cost savings and an employer may receive a refund at the end of the year if there are any unused funds.

Advantages of Level Funding

Level funding plans have become increasingly popular among small businesses and can be found throughout every industry. Switching to level funding insurance can provide both employers and employees a wide range of benefits. Some of these key advantages include the following:

Claims Experience Determines Rates

When determining the amount of money that a business will need to pay for health insurance, the health insurance company looks at the employer’s prior claims experience. If a business has a relatively healthy workforce, this can result in a more favorable premium amount. These lower premiums can lead to significant savings for businesses.

Refund Of Surplus

group of people on desk looking up How does level funding workWith level funding insurance, the portion of the level-funded premiums paid into the claims fund through the year and go unused are refunded back to the business. This differs from traditional health insurance plans in which the insurance company keeps any unused claims. This refund amount can be useful for many small businesses that require extra funding at the start of the year.

Detailed Reporting On Utilization Trends

Another major benefit of level funding is the delivery of detailed reports. Under level funding, businesses are provided with detailed reporting on utilization trends. This can provide employers with valuable insight on where employees may be contributing to overspending, such as going to the emergency room instead of urgent care.

Speak To The Level Funding Experts For More Info On How Does Level Funding Work

Level funding insurance is an effective way to achieve the independence from a self-funded insurance plan, while still retaining the predictability of a set monthly premium. These premiums are divided in three ways. Some of the premium is used to pay for employee claims, some is set aside for plan administration and the rest is invested in stop-loss coverage to protect the business against risks. Learn more about how level funding works or speak with an experienced level funding professional at New City Insurance.

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Carol Zhang
Carol Zhang
04:29 06 Mar 22
As a rapidly expanding national media organization, the employee benefits strategy and administration that New City has provided us during our growth has been invaluable. They have been proactive about informing us of the different benefit strategies available to us as we grow as well as managing the additional compliance laws and reporting requirements at each stage of our growth.
Claudia Villalobos
Claudia Villalobos
20:14 03 Mar 22
New City Insurance made navigating through all the health insurances super EASY. Their documents are highly informative, professional, and easy to work with. Thank you for making the process of choosing a health plan so simple. You guys are THE BEST!
Philippe Salas
Philippe Salas
17:02 22 Feb 22
I never expected to have a good time talking to an insurance salesman, but let me tell you Brendan was quite the treat. He was very helpful explaining the options and has a wonderful sense of humor. I hope to speak with him every time I call.
Jennifer Polito
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Super easy enrollment process. Fast and friendly customer service. If you are looking for an insurance company that is there for you every step of the way I highly recommend New City Insurance.
Rocky Salas
Rocky Salas
23:46 07 Jan 22
So friendly, I hope to speak to him again in all my future insurance needs.
Rocky Salas
Rocky Salas
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So friendly and soft spoken. I hope to speak to him again in all my future insurance needs.
Jose Brena
Jose Brena
13:20 06 Jan 22
Eric Calciano has been extremely helpful in finding and selecting the right insurance coverage for our company. With many options out there Eric assisted us on getting a low cost provider saving more than 20% than from our competitors and providing excellent coverage for our employees.
Anastasia Beaverhousen
Anastasia Beaverhousen
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Signing up for insurance was quick and easy. Felicity Sundsboe
SFCC
SFCC
22:08 29 Nov 21
Jeff Stoltey and his team provide excellent customer service. Jeff has always provided my company SFCC with straightforward options. I went to a larger insurance company only to RUN BACK to Jeff at New City Insurance. I recommend them to anyone needing insurance without hesitation.
Kevin Luby
Kevin Luby
19:13 22 Oct 21
Quick, easy & informative. We were able to secure quality insurance for our small business on a tight deadline. Thanks for the help New City.
Theresa Ruybol
Theresa Ruybol
19:30 01 Jul 21
Eric was so great with us. He was very patient and kind as we are a newer smaller organization who is growing rapidly. With that said, we had made our inquiry, he had great rapid response and mostly had to wait on me. Any request that we made and/or questions we had, he was great answering and helping us understand. Then when we were ready for all documents and to move forward, Brendan helped with getting that together and the two of them worked their magic on New City's end to notify me of what was needed, assist me in that process and confirming that all was complete and approved for the coverage. I just want to say thank you all again so much, as insurance has always been confusing to me, and you all made that process go a lot smoother.Thank you
Andrea Ordendorff
Andrea Ordendorff
21:06 07 May 21
I've been working with both Clayton and Brendan for well over a year. As the purchase of our dental practice was delayed well over 14 months they both patiently supported me and continued to make themselves available. When we were officially ready to sign up they made the whole process seamless and super easy. This team is highly knowledgeable, professional, supportive, and efficient! I can't thank them enough for everything they've done.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
Mike McClay
Mike McClay
19:36 03 May 19
My employer uses New City as their insurance broker, and I'm always amazed when I call in for assistance by how knowledgeable and attentive their staff is with my requests. Their online benefits platform makes selecting insurance plans pretty darn easy. I would highly recommend their services.
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