...a benefit plan that fits!
The Level Funding Benefit Plan
A hybrid benefit solution that delivers the advantages of Self-funding with the stability and peace of mind of Fully Insured coverage!
This is the essence of alternative funding, money not spent on benefits remains with the employer’s benefit plan, not the insurance company.
• Under a fully insured plan, the monthly premium costs are locked in. Even if a group is healthy and have no claims, the savings are kept by the insurance company.
• With Level Funding, and the use of Stop Loss Insurance, the employer pays a monthly cost that is the maximum cost.
• No matter how much claims are in a month, the employer will never pay more than this monthly cost. After all claims are paid for the year, the unused money in the claim fund is returned to the employer.
...You Keep the Savings!
How it Works
• Defined and Contained Risk - The employer’s maximum exposure and annual costs are determined up front through the purchase of Stop Loss insurance. Standard provisions include coverage for claims paid after the end of the plan year (no terminal liability exposure)
• Stabilized Cash Flow - Maximum annual claim liability is equally spread over 12 months. If the employer’s claim fund does not contain sufficient money to cover claims, the Stop Loss insurance coverage will advance the necessary funds (also referred to as “Accommodation”). No requests for additional money from the employer are made.
• Claim Fund - After the claim run-out period remaining funds are released or rolled over to the next year as credit.
• Maximum annual claims costs are predetermined and the employer pays 1/12 of this cost each month for the 12 months of the plan year. After this amount, there are no other charges for the claim fund. Once all claims have been paid for the plan year, any unused dollars in the claim fund are returned to the employer.
• Monthly Accommodation – If at any time the money necessary to pay smaller claims is not in the claim fund (this is common during the early months of a plan year), the insurer will advance this money to the claim fund to pay these claims. Subsequent monthly payments into the claim fund will be used to repay this advance.
• Reporting – Each month, the employer will receive an accounting report on all claims paid during the month and the plan year-to-date. Each quarter, they will receive a detailed report about claims paid (subject to federal and state privacy regulations.)
This reporting provides the information necessary to fully track the claim fund and to understand where the claim fund dollars are spent (such as the doctor’s office visits, prescription drugs, outpatient services and hospitalizations.) With this information, the plan can be designed to contain costs and target problem areas.
• Plan Year & Terminal Liability – The plan year runs for 12 months from the effective date. Claims incurred during the plan year will be paid though either a 3-month, 6-month or 9-month run-out period and any balance in the claims fund is refunded to the employer. Terminal Liability coverage is built into the plan by providing the 9-month run-out period.