Health insurance is one of the most significant investments an organization can make for its employees’ well-being and satisfaction. For small business owners, HR professionals, and benefits consultants, it’s an ongoing challenge to balance affordable premiums with comprehensive coverage. That’s where level funded health plans come into play.
These innovative solutions are gaining popularity for their ability to offer substantial cost savings without sacrificing benefits. Still, they come with specific compliance requirements that employers must be prepared to handle.
With our expertise at Carmel Bay Group, we not only guide clients in selecting the most cost-effective group health insurance plan but also help them handle the complexities that level funded plans entail—giving your business both cost savings and peace of mind.
What Are Level Funded Health Plans?
Level funded health plans combine the financial benefits of self-funded insurance with the predictability of traditional fully-insured plans. Unlike traditional group health insurance, where premiums are fixed regardless of claims, level funded health plans take claims experience into account, which often leads to lower costs for many employers.
Here’s how they work in simple terms:
- Fixed Monthly Payments – Employers pay a fixed monthly amount that covers projected health claims, administrative fees, and stop-loss insurance.
- Stop-Loss Protection – If claims exceed what’s projected, stop-loss insurance covers the gap, ensuring employers aren’t stuck with unexpected high expenses.
- Refund Potential – If claims are lower than expected, employers often receive a refund at the end of the plan year for any remaining claims fund surplus.
This structure enables businesses to benefit from predictable monthly costs while also having the chance to save significantly if their employees’ claims are low.
Level funded plans are most commonly available through major carriers like United Healthcare, making them accessible and trustworthy.
Why Consider a Level Funded Health Plan?
If your small business has been weighing the pros and cons of group health insurance options, here’s why level funded plans should be on your radar:
Cost Savings Without Sacrificing Benefits
Traditional fully-insured health plans often come with a one-size-fits-all pricing model that doesn’t factor in your group’s individual claims history. With level funded health plans, costs are tailored to your group, often leading to substantial savings. And, even though you’re saving money, employees still enjoy access to quality benefits comparable to those in fully-insured plans.
Detailed Claims Data
Level funded health plans provide employers with claims reports that offer transparency into healthcare usage trends. Employers can use these insights to make data-driven decisions, such as adding wellness initiatives or adjusting benefits to better meet employee needs. (Don’t worry—employee-specific information remains confidential and protected under HIPAA compliance standards.)
Refund Advantages
One of the biggest appeals of a level funded plan is the possibility of receiving a refund. If your group claims less than what’s projected during the plan year, the leftover funds in your claims account may go straight back to your organization. Consider it a reward for maintaining a healthier workforce!
Predictability and Protection
Traditional self-funded plans expose employers to significant financial risks if claims skyrocket. However, with level funded plans, stop-loss coverage ensures that you’re protected from runaway healthcare costs, giving you the best of both worlds.
Flexibility for Growing Businesses
Level funded health plans are customizable. If your business grows, you’ll find these plans adaptable to your changing needs.
Compliance Requirements for Level Funded Health Plans
While level funded health plans have plenty of benefits, employers need to be prepared to take on some additional compliance responsibilities. Unlike fully insured plans, level funded plans shift certain regulatory requirements to the employer. Here are the key ones to keep in mind:
1095-B Forms
Under the Affordable Care Act (ACA), employers offering level funded health plans are responsible for furnishing 1095-B forms to employees and filing them with the IRS. These forms provide information on the healthcare coverage offered throughout the year and help ensure compliance with the ACA’s individual shared responsibility requirements.
For many small businesses, handling these forms can be overwhelming. This is where Carmel Bay Group steps in. With our expertise in level funded health plans, we ensure accurate and timely filing for our clients, eliminating the administrative burden from your plate.
PCORI Fees
Employers offering level funded plans must also pay PCORI fees, which help fund the Patient-Centered Outcomes Research Institute. These fees are due annually and must be reported using IRS Form 720. While this requirement doesn’t add significant costs, it’s crucial to stay ahead of deadlines to avoid unnecessary penalties.
ERISA Compliance
Level funded plans are typically governed by the Employee Retirement Income Security Act (ERISA). This means employers are responsible for ensuring compliance with ERISA’s reporting, disclosure, and fiduciary requirements.
The good news? When you work with Carmel Bay Group, we not only help you secure a great health plan but also assist with these compliance hurdles, so you can focus on running your business.
Common Misconceptions About Level Funded Plans
Despite their advantages, some employers hesitate to explore level funded health plans due to misconceptions. Here’s the truth behind some of the most common myths:
- Myth: Level funded plans are only for large employers.
- Reality: These plans are often ideal for small to mid-size businesses, especially those with 10–100 employees.
- Myth: Administering level funded plans is too complicated for small businesses.
- Reality: With the help of experts, like Carmel Bay Group, compliance and administration are streamlined and straightforward.
- Myth: Employees won’t have access to the same networks.
- Reality: Many level funded plans from major carriers, like United Healthcare, provide access to extensive provider networks nationwide.
Partner with Carmel Bay Group for Expert Guidance
Navigating the world of group health insurance can be intimidating, but you don’t have to do it alone. At Carmel Bay Group, we specialize in level funded health plans, offering the expertise to help you truly understand your options and their implications. Unlike general insurance brokers, we go the extra mile by assisting our clients with all compliance requirements, such as 1095-B filings and PCORI fees.
Our goal is simple—help you save money without sacrificing benefits while ensuring compliance every step of the way.
Take the Next Step
If you’re ready to explore whether a level funded health plan is right for your business, reach out to Carmel Bay Group today. Together, we’ll find a plan that works for you and your team, delivering both cost savings and quality care.