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What Is Level Funding Insurance?

January 28, 2021, by New City Insurance

boss and employee teaching what is level funding insuranceLevel funding Insurance is a way to properly budget and fund your self-funded health insurance plan for your employees. A self-funded health insurance plan is an often used benefits strategy that provides your employees with healthcare funded through your organization rather than through a third-party health insurance company. This can lower costs for your employees and reduce the financial obligations of your organization as it relates to funding employee benefits.

Self Funded Vs. Level Funding

A self-funded insurance plan is a great way to provide your employees with reliable, low-cost health insurance coverage. The idea is simple: claims are covered by your organization instead of a third-party employee health insurance provider. However, many employers find it challenging to properly budget for the self-funded insurance plan they have for employees. Mismanagement of the self-funded plan could lead to a substantial loss of money for your organization or a lack of adequate coverage for your employees.

Level funding insurance is a reliable way to budget and fund your self-funded insurance plan. This option involves paying set monthly premiums to an insurance carrier or third party administrator (TPA). Level funding also includes paying out the claims made by your employees, according to their needs and their coverage by your self-funded insurance plan.

The Basics Of Level Funding Insurance

Every level funding insurance plan is personalized, and each may look slightly different. However, there are some basics of level funding insurance that you can expect with your plan to help you budget and manage the finances for your self-funded insurance plan.

Employer Pays Fixed Amount

women at her desk googling what is level funding insuranceWith level funding, the carrier or TPA holds the money for claims. This money is not allowed to be spent for any other reason or taken by the carrier. Instead, it is specifically set aside to pay employee claims that are related to injury or illness. The way it works is simple. The employer makes periodic payments to the carrier. The fixed amount for each payment is pre-determined based on various factors, including the number of employees and the extensiveness of the health insurance coverage. The payments generally occur once a month, although some employers choose to make payments more or less often depending on their specific situation.

Rates Are Set On History Of Claims

The difficult process for many employers as it relates to self-funded health insurance is determining the costs associated with setting up this type of health plan. With level funding, the rates are based on the previous claims made by employees. By studying the claims history, your organization can get a clear idea of the average cost for paying out claims each year. Based on this information, you can set your rates and know how much you should deposit each month to always have enough to cover the claims made by your employees.

Helps To Manage Risk

One of the main purposes of level funding is to mitigate risk for the employer. Self-funded insurance plans are great in many ways, but they require more involvement and risk for the employer. Level funding simply makes the organization process easier. It reduces the chance of paying large sums of money for claims that you do not have the funds to pay. This is because level funding involves consistent contributions to the self-funded insurance plan and strategic calculation of how much each deposit into the level fund should be.

Provides Greater Certainty For Budgeting

Perhaps the main reason self-funded insurance plans fail is that the employer has not properly budgeted for the payout of claims. This leads to substantial loss when a large claim must be fulfilled, and there is a shortage in the budget. Level funding insurance allows the employer to place money periodically, so there is never one large sum due.

Offers Greater Predictability

group of office workers looking up what is level funding insuranceBesides the detailed analysis of claims history that goes into deciding the amount your organization puts into level funding each month, employers also have greater predictability financially as they know their self-funded plan is properly budgeted for and funded.

How Does It Benefit Employers?

Level funding benefits the employer by allowing them to make regular contributions for the self-funded plan, rather than pulling money directly away from the profits when a claim must be fulfilled. This allows for reduced costs, more effective record keeping and peace of mind as they know the insurance s being appropriately handled.

Reach Out To Our Level Funding Insurance Agents

At New City Insurance, we take pride in helping our clients maintain an organized and cost-efficient self-funded insurance plan for their employees. Reach out to our experts today with any questions or concerns and let’s see if self-funded insurance is right for your business.

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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
Jennifer Polito
17:15 09 Feb 22
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
23:38 07 Jan 22
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
17:05 28 Dec 21
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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