What if you could grow your book of business and earn more commission—all while helping your small business clients save money in providing their employees with health insurance coverage? You can achieve this with the little-known secret top agents benefit from: selling level-funded health plans. With this agent’s guide on level-funded health insurance, you’ll know how to convince your small business clients why this alternative group health insurance solution can be a smart choice for their bottom line.
What Are Level-Funded Health Plans?
A level-funded plan is a type of self-funded health insurance that has fixed, or “level,” monthly payments. Level-funded health insurance allows small employers to take advantage of the financial benefits and plan design flexibility that a self-funded plan offers. Because level-funded health plans use medical underwriting and age/gender ratings, employers with a young and healthy workforce can pay less for employee health benefits. This is a main difference when compared to fully insured health plans that use an adjusted community rating set by the Affordable Care Act (ACA). The ACA doesn’t allow community-rated plans to use health assessments that can offer employers cost savings. So small employers looking for an alternative solution to fully insured coverage may find that level-funded health insurance is a better way to manage costs.
Selling Level-Funded Health Plans to Small Groups in the Under 50 Eligible Employee Market
Rising healthcare costs is a main reason why many small firms with fewer than 50 eligible employees are dropping traditional group health insurance, often fully insured plans. Strict ACA compliance rules also play a role in fewer small businesses offering traditional group coverage.
Because fully insured plans are subject to more ACA requirements and state insurance laws, selling level-funded health plans can offer small employers less burdensome compliance requirements. And with the uncertainties of ACA healthcare law changes that affect the traditional insurance market, level-funded plans can be a more stable option for some small employers.
Why Does Selling Level-Funded Plans Attract More Small Business Clients?
If you want to grow your book of business in the small group market, consider these eight reasons that can help you sell level-funded health insurance to the right clients.
- Access to lower rates. For clients with younger and healthier groups, the cost of a level-funded plan is less expensive than an ACA-regulated health plan. Level-funded plans can offer small employers up to 30 percent savings on health insurance costs, according to BenefitsPro.
- Refundable claim dollars. With most level-funded health plans, the employer may have access to a refund of some of the unused money that’s left in the claims fund at the end of the year. With fully insured plans, the insurance carrier keeps all of the unused funds.
- Flexible benefit design. Employers can customize level-funded plans to offer benefits that best meet the needs of employees. Level-funded insurance offers the same amount of coverage as ACA-regulated plans, but they are not subject to state-mandated benefits.
- Protection from claims risk. Because of stop-loss insurance, employers are not responsible for paying additional claims that exceed the monthly payments in the plan’s claim fund.*
- Predictable payments. Both the employer and employee pay a set monthly amount. Fixed payments go toward claims funding, the stop-loss premium, and administrative fees.
- No premium taxes. Unlike fully insured plans, level-funded plans are exempt from state taxes on premiums, which are usually 2 to 3 percent of the plan premium. Plans are also exempt from the ACA health insurance tax (HIT) on premiums. “The HIT increases employment costs for small businesses but not for big businesses,” according to the National Federation of Independent Businesses (NFIB). So small employers who provide fully insured coverage could save extra money on hiring costs by switching to a level-funded plan.
- Transparent cost details. The proposal on a level-funded plan shows the cost of each part of the plan structure to both the agent and the employer. With fully insured plans, the breakdown of the costs is usually not disclosed.
- Plans from major carriers. Most major insurance carriers offer level-funded plans. So your small business clients can be confident they’re getting access to an alternative employee benefits solution from the same carriers that offer traditional fully insured coverage.
*The ACA requires all self-insured health plans to pay a small annual fee ($2.39 in 2018) to help fund the Patient-Centered Outcomes Research Institute (PCORI) through 2019. This is the only additional cost above a level-funded plan’s monthly premium payment.
What Small Groups Are Most Suitable for Level-Funded Health Plans?
Level-funded health plans are usually more widely available to groups with 10 or more employees. But some insurance carriers allow you to offer level-funded insurance to groups with as little as two or five employees. To make the most of selling level-funded plans, you need to know which employers are the best fit for coverage. Below are some characteristics of small employers who can benefit the most from self-insuring their employees through a level-funded plan.
How Do Level-Funded Health Plans Work?
Level-funded health plans work similar to fully insured plans. They both have the same structure. The main difference is level-funded insurance uses medical underwriting to determine the group’s eligibility for coverage. The structure of level-funded health insurance consists of three elements.
1. Plan Set-Up Administration
- Employers contract directly with the insurance carrier to manage the enrollment, claim, and payment process.
- The carrier establishes a network of providers and determines the underwriting requirements, premiums, copays, coinsurance, and deductibles.
2. Claims Fund
- This is funded through a portion of the group’s monthly payments to the insurance carrier. The payments are used to pay for approved claims.
- The carrier determines the amount that should be set aside in the claims fund based on the group’s age, gender, and overall health risk.
3. Stop-Loss Insurance
- Stop-loss insurance sets a maximum yearly cost for claimer. It is built into the monthly premium.
- Stop-loss coverage kicks in when healthcare claims exceed the money in the claims fund.
How Excelsior Helps Agents Sell Level-Funded Health Plans
Many brokers don’t have the training to educate their clients on how level-funded health plans work, according to BenefitsPro. As a result, many small business owners may not be aware of the cost savings level-funded health insurance plans offer. But with access to Excelsior’s expert support on alternate funding strategies, you can have an advantage in selling level-funded plans to the small group market. Our group brokerage:
- Product positioning support. Our sales team is well-versed in the structure and implementation of level-funded insurance. We help you position level-funded plans to the right clients, so you can close more sales.
- Carrier support. Our group brokerage has strong ties with carrier networks to help guide you in choosing the right level-funded insurance carriers for your clients’ needs. Plus, our deep knowledge of carrier processes can make selling level-funded health insurance plans a seamless process.
- Case submission support. From helping you with preliminary quotes and submitting applications to underwriting and assisting with the renewal process, our full-service general agency is here to help make sure your cases are submitted accurately and on time.
Plus, you can get training on new group market products and learn proven sales strategies at insurance events we hold throughout the year. Make selling level-funded health plans to your small business clients the solution to growing your book of business. Engage with Excelsior to get started today!