Unlocking the benefits of level funding: a deep dive for brokers

In today’s complex healthcare landscape, employers are continually seeking innovative ways to provide comprehensive health benefits while controlling costs. Forced to choose between the heightened risk that comes with self funding and the higher costs and limited plan designs associated with fully-insured health plans, small and midsize businesses – and their employees – are often left with few options. Fortunately, this is where level funding can be a game-changer for SMBs. But what exactly is level funding, and why has it become so popular? Keep reading to understand the key advantages and considerations for employers and employees.

What are level-funded health plans?

Level funding is a version of self-funding that combines the best of both models, allowing employers to strike a balance between the amount of financial risk they assume and the amount they pay in monthly premiums. With level funding, employers pay a fixed, or “level”, monthly premium to cover:

• Administrative costs: Fees for plan management and services provided by the insurance carrier or third-party administrator (TPA)
• Claims: Payments to cover employee healthcare claims up to a certain amount
• Stop-loss insurance: Protection against catastrophic claims that exceed predefined limits

A simple way to understand stop-loss protection is to think of it as insurance for the insurance. With level funding, if claims exceed the defined threshold in a given plan year, stop-loss kicks in to cover the difference, reducing risk for the employer. Even better, if claims total less than the amount paid in premiums at the end of the plan year, employers may receive a refund or credit for the surplus funds. For more on this, watch this short clip from our podcast, It’s a Gravie Thing.

As a licensed TPA, Gravie offers an array of level-funded health benefit solutions for employers. These include traditional copay and HSA plans, as well as our flagship product, Comfort®, a first-of-its-kinds health plan that eliminates copays and deductibles on routine healthcare services like preventive care, urgent care, virtual care and generic drugs. By removing these cost barriers and prioritizing coverage of services that help keep people healthy, members are more incentivized to seek care when they need it, promoting better health outcomes over time. 

Who is a good fit for level-funded health plans?

Level-funded health plans are ideal for small and midsize employers who don’t have the risk tolerance required for self-funding, but who aren’t keen on paying for a fully-funded health plan that has limited employee appeal, high premiums and few tools to mitigate cost trend. If your clients are feeling stuck between these two wholly imperfect options, it may be time to consider how level funding could help them. 

Since no two businesses are alike, it’s important to evaluate a group’s specific situation to see if level funding is a good fit. At Gravie, we bring a comprehensive, consultative approach to this process, particularly when it comes to our underwriting. We use machine learning and intelligent data processing to evaluate an employer’s workforce size, demographics and claims history, enabling us to more accurately predict future plan performance and make recommendations that ensure they reap the most value from their benefits each year.

Level-funded health plans could be the key to helping your clients unlock greater control of their healthcare spending, while still providing valuable and comprehensive benefits to their employees. And in a landscape where incumbent group insurance players have tuned their business model and offerings to satisfy the needs of larger corporations, level funding offers the promise of a more level playing field for SMBs.

If you want to learn more about partnering with Gravie to level-up your client’s health benefits, book a meeting with us.