Is Level Funding a Good Fit for Your Employee Benefits Plan?
Level funding is a great strategy for employers that are interested in self-funding, but like a plan that looks and feels like it is fully insured. Level funding acts just like a fully insured plan, except it provides the opportunity for a surplus in a good claims year, enhanced claims reporting and limited administrative burden.
Advantages of Level Funding
There are many advantages to considering level funding. Without going straight to stop-loss carriers and third-party administrators, groups can work with the carriers that they’re probably already working with on a fully insured basis. It provides the opportunity to receive reporting they may not be receiving today. The opportunity for a surplus that in good years when you’re fully insured, you would not receive. Not to mention, you don’t have the administrative burdens and potential risk of going fully self-insured with a third-party administrator and a stop-loss carrier.
Disadvantages of Level Funding
As with any strategy, there are cons to consider when looking at level funding. With level funding, you do receive a surplus, but often that surplus is split with the carrier. Then in the final year, if you’d like to leave level funding, you often forfeit the entire surplus. Also, while you do receive enhanced claims reporting, it is still limited comparatively to what you would receive in a self-funded environment. Overall, employers are limited in the advanced strategies that they may want to implement in a level funded environment.
Is Level Funding a Good Fit for Your Organization?
The typical employer that considers level funding is one that is small or midsize and fully insured. They often are worried about the risks that may come with self-funding, so level funding is a good in-between before moving towards a self-funding environment.
If you have any questions or are considering level funding, contact us at info@ibpllc.com.
