With the economy experiencing high employee turnover and rising inflation, small business owners may be dealing with the financial challenges of offering adequate, affordable coverage to their employees.
Level funded plans offer a potential way to help control costs
Also called alternate funding plans, level funded plans may help employers reduce their overall health care costs and help employees get more out of their benefits. These plans include 3 components:
- The plan sponsor’s self-funded medical plan. As plan sponsor, the employer sets up this plan to pay medical expenses for covered plan participants.
- A third-party claims administration agreement. The plan sponsor enters into an agreement with the administrator, who provides claims processing, billing, customer support and other services.
- A stop loss insurance policy. This provides coverage for large, catastrophic claims by a single covered plan participant and provides overall coverage in the event all medical claims go beyond a certain dollar limit.
Traditional insurance vs. level funded plans
Traditional: With traditional insurance plans, the employer pays a fixed premium to the insurance company. The insurance company assumes all the risk, paying the medical claims, administrative costs, sales commissions, and taxes.
At the end of the plan year, if the actual medical claims are higher than expected, the insurance company covers them.
But if they’re lower, the insurance company keeps the difference.
Level funded: With a level funded plan, the employer as plan sponsor sets up a medical plan that pays for plan participants’ medical claims directly. Part of the risk is taken on by the medical plan, with the rest covered by stop loss insurance. The plan’s level-funding structure means the administration fees, stop loss premium and monthly maximum claim liability are included in one fixed monthly invoice throughout the plan year.
At the end of the plan year, if the total medical claims are lower than expected, the plan sponsor may receive a surplus refund for their health plan.1 And if they’re higher? The stop loss insurance policy covers them.
A great way to experience financial flexibility and freedom
Specifically designed for small businesses looking for an alternative to a traditional plan, level funded plans may help plan sponsors:
- Be exempt from many Affordable Care Act regulations (groups 2–50 not subject to adjusted community rating)
- Pay lower state premium taxes throughout the year (stop loss coverage is still subject to premium tax)
- Receive a surplus refund for their health plan at the end of the plan year if medical claims are lower than expected1
With a variety of plan and network designs, innovative wellness programs and robust member tools, a UnitedHealthcare Level Funded plan is great way for small businesses to provide quality coverage designed for affordability.
For more information and a quote, contact your broker or visit uhc.com/savingsmi.
1Please consult a tax and/or legal advisor to determine if, by receiving this surplus refund, there are any restrictions or obligations.
Surplus refund only available where allowed by law.
Administrative services provided by United HealthCare Services, Inc. or their affiliates, and UnitedHealthcare Service LLC in NY. Stop loss insurance is underwritten by UnitedHealthcare Insurance Company or their affiliates, including UnitedHealthcare Life Insurance Company in NJ, and UnitedHealthcare Insurance Company of New York in NY.
