This article is for Colorado employers seeking a comparison of group health insurance fully-insured vs level-funded plans.
Understanding Fully-Insured vs Level-Funded Plans
Are you a small or medium-sized business owner in Colorado Springs grappling with the complexities of employee health benefits? You’re not alone. Many local businesses struggle to navigate the maze of fully insured vs level-funded plans while staying compliant with ACA requirements and managing costs.
It’s important to note that under the Affordable Care Act (often referred to as Obamacare), most individuals and businesses are currently enrolled in fully-insured plans. However, a growing number of businesses are exploring level-funded plans as a potential cost-saving alternative.
Let’s break down these two options to help you make an informed decision for your Colorado Springs business.
Fully-Insured Plans: The Traditional Approach
Fully-insured plans have long been the go-to option for many businesses, and they’re the most common type of plan under the ACA. Here’s what you need to know:
- Fixed premiums paid to an insurance carrier: You’ll pay a set amount each month, providing predictability for your budget.
- Predictable monthly costs for easier budgeting: This can be especially beneficial for smaller businesses or those with fluctuating cash flow.
- Less administrative work for your team: The insurance carrier handles most of the paperwork and claims processing.
- The carrier assumes all risk: If claims exceed premiums, the insurance company bears the financial burden.
- Limited flexibility in plan design: You’re generally restricted to the carrier’s pre-designed plans, which may not perfectly fit your employees’ needs.
- Potentially higher long-term costs: Over time, you may pay more than necessary if your employees are generally healthy.
- ACA compliance: These plans are designed to meet all ACA requirements, reducing your compliance concerns.
Level-Funded Plans: The Hybrid Solution with Medical Screening
Level-funded plans, falling under the partially self-funded category, are gaining significant traction in the marketplace. Their key feature? Medical screening. Here’s why this matters:
- Medical screening is THE key feature: Unlike fully-insured plans under the ACA, level-funded plans can use medical screening to assess risk.
- Potential for significant cost savings: By identifying healthier groups, insurers can offer more competitive rates.
- Not available to all companies: Insurers are selective, looking for win-win scenarios for both the employer and the insurer.
- A blend of fully insured and self-funded approaches: You get the best of both worlds – predictability and potential savings.
- Fixed monthly payments for predictable budgeting: Similar to fully-insured plans, you’ll know your monthly costs in advance.
- Potential for refunds if claims are lower than expected: If your employees use less healthcare than anticipated, you may receive money back at year’s end.
- More flexibility in plan design: You can often customize benefits to suit your workforce’s specific needs better.
- Access to valuable claims data for better cost management: This information can help you make informed decisions about wellness programs and plan adjustments.
- Requires more hands-on management: You’ll need to be more involved in the plan’s administration, but this can lead to better cost control.
Growing Popularity of Level-Funded Plans
Level-funded plans have been developing strength in the marketplace for several reasons:
- Employers are thirsty for cost control: With healthcare costs continually rising, businesses are eager to find ways to manage expenses.
- Potential for lower premiums: For companies with healthier employees, level-funded plans can offer significant savings.
- Greater transparency: Access to claims data allows businesses to make more informed decisions about their health benefits strategy.
- Flexibility in plan design: Companies can tailor their plans to meet the specific needs of their workforce better.
However, it’s crucial to understand that level-funded plans aren’t suitable for every business. Insurance companies are selective because they’re looking for win-win deals that benefit both the employer and the insurer.
Important Considerations for Level-Funded Plans
While level-funded plans offer many advantages, there are some important factors to consider:
- Not all companies will be approved: Due to medical screening, some businesses may not qualify for level-funded plans.
- Potential for returning to fully-insured plans: Companies enrolled in level-funded plans may find themselves in a situation where they have so many ongoing medical claims that they’re no longer a good fit for level funding. In such cases, businesses have the option of returning to fully-funded platforms where all conditions will be accepted.
- Risk tolerance: Level-funded plans involve more financial risk, but also more potential reward.
- Administrative capacity: These plans require more hands-on management from the employer.
Benefits of Working with an Independent Health Insurance Broker
Navigating the complexities of fully-insured vs level-funded plans can be challenging. An independent health insurance broker in Colorado Springs can provide valuable assistance:
- Unbiased advice: Independent brokers work with multiple insurance carriers, offering objective recommendations based on your specific needs.
- In-depth market knowledge: Experienced brokers stay up-to-date with the latest trends and offerings in the health insurance market.
- Customized solutions: They can help tailor a plan that fits your business’s unique needs and risk profile.
- Cost savings: Brokers can often negotiate better rates and find cost-effective solutions you might not discover on your own.
- Ongoing support: A good broker provides assistance throughout the year, not just during open enrollment.
Next Steps: Exploring Your Options
Ready to explore whether a level-funded plan could be a good fit for your Colorado Springs business? Or do you need help evaluating if your current fully-insured plan is still the best option? Contact an independent health insurance broker at Preferred Insurance of Colorado Springs today. They can help you navigate these complex choices and create a health benefits strategy that works for your business and your employees.
