When it comes to offering health benefits to employees, every employer has two primary goals: improve coverage and lower costs.
Achieving those goals may help encourage a healthier workforce, while reducing absenteeism and presenteeism, both of which can sap productivity and make an employer less competitive. Importantly, medical care ranks as the second largest expense (behind salaries) for employers, so it is vital employers maximize the value of their health benefits.
Rather than watching health plan premiums go up year after year, what if employers could cut costs by up to 15% or more compared to their existing benefits package? While that might sound too good to be true, the growing popularity of level-funded plans is making that possible for some employers when they move from a fully insured plan. Tellingly, a recent report found that 42% of small firms use a level-funded plan, up from just 7% two years ago.
To help employers, especially small and mid-size businesses, navigate the transition from fully insured to level-funded (or even self-funded) health plans, here are three steps to consider:
Evaluate Your Plan Options. Historically, employers often selected either a fully insured plan or, as companies grew larger, moved to a self-funded arrangement, which yielded potential savings but came with additional financial risks if medical costs exceeded expectations. A third option employers have recently adopted more often is a level-funded plan, which offers the potential savings available through self-funded plans but with less financial risk. In short, employers with level-funded plans pay a fixed monthly fee to cover claims, administrative fees and stop-loss insurance, which helps protect against unexpectedly large claims. If medical claims are lower than expected, the employer can potentially keep some of the surplus refund at year end.
Request an Underwriting Analysis. To determine if such upfront savings would be possible for your business, the next step is to request an underwriting analysis to review your company’s previous medical claims and other factors to help determine what reduction may be available. This can be coordinated by an insurance broker or by connecting directly with a health insurance company that offers level-funded plans. Generally, employers with relatively younger and healthier workforces may save the most. In fact, employers with UnitedHealthcare Level Funded plans on average paid 18% less than comparable fully insured plans.
Leverage Various Types of Technology. Once an employer opts for a level-funded plan, it is important to help employees and their families play a more active role in their well-being and adopt ways to save on out-of-pocket costs. One way to achieve that is by including a wearable device well-being program, where individuals use smartwatches or fitness trackers to monitor activity levels and may earn financial incentives for meeting certain goals. Employers with level-funded plans should also include coverage and resources related to virtual care, offering employees a more convenient and affordable way to access medical care, including primary care visits, urgent care visits, behavioral health care and chronic condition management. With the ongoing spread of the virus that causes COVID-19, encouraging the use of virtual care is especially important as an alternative to in-person care.
By considering a move to a level-funded plan and adopting these additional strategies, employers may make offering medical coverage to their workforces more affordable and personalized.