Establishing employee health coverage has become an essential part of operating a business, large or small. However, smaller enterprises have had a more challenging time acquiring sufficient coverage since the passing of the Affordable Care Act. One solution that has been devised is level funded health plans. Below is a description of how it works, and the advantages companies can gain by using it.
How These Plans Work
The level funded health plan gives companies the opportunity to utilize ACA in specific scenarios. They can be used in conjunction with certain underwriting increases, which benefits small companies in a number of ways. These plans are self-funded partially, and function in a way that is similar to small group insurance plans. The difference however is that the funds for unspent claims will stay in the claim fund of the employer as opposed to the insurance carrier.
Level Funded Health Plans Eliminate Risk
Level funded plans give employers the opportunity to pay premiums on a monthly basis which have been set for the firm. The employer will allocate a specific amount for yearly claims, which will be up to $20,000 per employee. Should an employee become gravely ill, and need specialized care, the employer has the option to revert to the classical ACA plan with no penalty or risk. When you revert to a plan that is completely insured, the company can save money since it isn’t paying for additional coverage.
Level Funded Health Plans Provide Coverage For Stop Losses
If an employee becomes seriously ill, so much so that treating them would use up much of the coverage that the company has allocated, level funded health plans have a built in solution, which is the stop loss. It prevents the company from losing coverage by setting a limit which if exceeded the insurance company will provide reimbursement.
Level Funded Health Plans Are Exempt From Mandates Associated With ACA
Those familiar with the Affordable Care Act know that there are taxes associated with it. The good news for those that choose a level funded health plan is that they may be eligible for tax exemptions. For instance, level funded plans do not have taxes associated with health insurance and they are also immune to mandated benefits compliance. However, it is important to talk with an insurance company to find out what specific exemptions apply to you.
Level Funded Health Plans Give Employers Greater Control
Employers that are seeking greater control over insurance premiums and plans will get it with level funded solutions. This is because they give employers the opportunity to analyze costs and risks associated with their employees to decide what is best for them. This ensures that the choice they make will be one their employees can afford. Perhaps the most attractive thing about the level funded health plan is that many, if not most of the ACA health reforms don’t apply. For instance, under ACA, employers are normally expected to maintain essential medical coverage, but with a level funded plan employers can decide what they will and will not cover.