Last month I did something that’s starting to become my favorite part of running this benefits agency – I dropped off a big refund check to a client.
You see, this client – a small construction business in Maryland with less than 500 employees – recently stopped buying their health insurance directly from one of the major carriers. For the first time in their company’s history, they worked with the team at Jordan Insurance Group to switch from a traditional fully-funded plan to a level-funded health plan.
There are two types of funding arrangements in self-funding:
- Traditional $0 balance, “pay-as-you-go”: you fund claims as they occur.
- Level-funded: Pre-fund maximum aggregate attachment point. Designed for fully-insured employers for small and mid-market.
Here’s how they switched to level-funding, and what that means:
- When you and your employees pay one of the major insurance companies (Carefirst, Aetna, Cigna, United, etc.) each month, you’re paying for 4 things: payment of your health claims; administrative costs of the plan; and profit/returns for the insurance company.
- If you go to a level-funded plan, you still have access to the same large physician networks as the big plans – you simply cut out their profit and keep it for your company/your shareholders.
- Switching to a level-funded plan is easy: you simply choose the provider network that’s best for your employees (many times you can keep the same one you have now); you set up a bank account that you pay your health insurance premiums in, just like you in the past would have paid to the insurance company; you select a company to handle all the paperwork, support, and claims payments from that account; and at the end of the year you keep what’s left instead of it just hitting the profit line of the insurance companies.
But what if our employees and their dependents have a lot of claims, more than what we’ve paid into the bank account?
That’s just it – the most important piece of a level-funded plan is a very simple stop-loss insurance policy that’s built into every plan. With one simple policy, you are guaranteed not to pay over a certain amount (you choose the ceiling/amount based on your risk tolerance) no matter what claims are filed in that period.
Instead of a (roughly) 33% increase in your health care costs in 2018, you could see savings (that’s right – a reduction in your healthcare costs) of approximately 10-20%. With a level-funded plan, and the right stop-loss insurance policy, the worst-case scenario is that your health costs remain flat from 2017. Either way – you win.
What most small business owners don’t know: 86% of businesses in the U.S. with 200+ or more employees switched to level-funding insurance plans years ago rather than buying directly from the carriers; it just makes sense. Insurance companies are making their profit from small and medium sized business. Every time another company goes level-funded – they raise their rates to make up the difference.
We’re helping companies put together a plan to move from the big insurance companies to a level-funded plan. If your rates keep going up – let’s talk.
Call me at 410-312-0811 or email me at BJordan@JordanIG.com and we can set up a time to talk.