Fully Insured Plans
These are the most traditional – and most simple – health insurance plans. Employers pay a fixed monthly premium to the health insurance company. This allows for all liability for paying claims to be transferred to the health insurance company.
For small businesses (fewer than 50 employees), these plans are best for employer groups with higher risk/higher claims. Premiums are based solely upon the age and the location of the business, and do not take into consideration additional factors such as claims history, health conditions, or the overall risk of the group.
For medium-sized businesses (more than 50 employees), these plans are best for employers that prefer a fixed monthly budget. They can also be beneficial for employers that may have more risk or claim frequency within their enrolled population.
Level-funded plans have become increasingly popular for small businesses. These plans are housed on a self-funded platform, but are designed to look and feel like a fully insured plan, with a fixed monthly cost and no additional financial liability to the employer. A level-funded plan is best for a group with below-average claims or risk.
The cost of a level-funded plan is often much more attractive, and employers can get refunded at year-end if claims are low. However, level-funded plans require employers to conduct additional ACA reporting. An additional consideration is that Texas State Continuation does not apply to level-funded plans. Since COBRA does not apply to employers with fewer than 20 employees, an employer with a level-funded plan and fewer than 20 employees would not have an option for terminated employees to continue coverage once their employment or eligibility ends.
Abbot Benefits Group is committed to supporting our clients with their level-funded plans. As a result, we handle the burden of ACA reporting at the end of the year. Employers are only required to review for accuracy and send when approved. We also help with filing the Patient Centered Outcomes Research Institute (PCORI) paperwork, guiding employers to help them properly fill out IRS form 720.
In a private exchange, employers are put on a level-funded plan – but the claims fund is pooled between all employers on the exchange. In a small group of 10 to 20 employees, claims will be combined with all other groups in the pool.
This creates a much more stable renewal environment for smaller groups, as the exchange performs as a large group (for example, as 400 employees) rather than a small group. Abbot Benefits Group is proud to offer this emerging medical benefits plan to small businesses through our partnership with Benefit Concepts, Inc.
Self-funded plans are most common in employers with more than 100 employees. In a self-funded plan, the employer is financially liable to pay claims until they reach the stop loss limits. These limits typically fall into one of the following categories:
- Specific stop loss insurance, which covers all claims for an individual member after they exceed a threshold (such as $25,000 or $40,000).
- Aggregate stop loss insurance, which pays for claims once the entire group has exceeded a threshold (typically 125% of total expected claims, which are determined upon quoting).
Self-funded plans are best for groups with a good claims history, and for employers that are proactively trying to lower claims costs, such as by implementing wellness programs or various benefit design considerations. Costs to the employer may fluctuate, and additional administrative oversight will be required (weekly reports, payments, etc.) with a self-funded plan.
However, employers that are the right fit can save a significant amount of money over the long run. Similar to the stock market, the returns from the good years could easily outweigh the costs from the bad years.
This is a unique option for stop loss insurance for employers on a self-funded plan. Rather than pay a stop loss company to provide insurance, the employer joins a “captive” with other participating employers to create – and own – their own stop loss company.
Since employers own the captive, they share in the stop loss insurance profits and receive a dividend after the policy year ends. They also enjoy greater control and flexibility; but just as employers can share in the profits, medical captives come with equal risk that employers could share in the losses.