Category: Medicare
If you own a small or medium-sized business, you know the annual "renewal dance" all too well. Every year, your health insurance carrier sends a letter that looks like a ransom note, demanding a 10%, 15%, or even 20% premium increase. You’re told it’s because of "market trends" or "rising healthcare costs," even if your employees didn’t even use their insurance much last year.
It feels like you're throwing money into a black hole. In a traditional "fully insured" plan (the kind most small businesses have), the insurance company keeps every penny of your premium, whether your team is healthy or not. If you pay $100,000 in premiums and your employees only use $40,000 in care, the insurance company keeps that $60,000 "surplus" as profit.
But there is a better way. We call it the "cheat code" for small business benefits: Level Funding.
What Exactly is Level Funding?
Think of Level Funding as the "Goldilocks" of health insurance. It sits right in the middle between being Fully Insured (where the carrier takes all the risk and all the profit) and being Self-Insured (where the business takes all the risk, which is usually too scary for small companies).
Level funding gives you the stability of a fixed monthly payment while offering the upside of a self-insured plan. You pay a set amount every month, no surprises, but if your claims are lower than expected, you actually get money back.
How the "Cheat Code" Works (The Three Buckets)
When you pay your monthly level-funded premium, that money is split into three specific "buckets." Understanding this is key to seeing why it's such a great deal for healthy groups:
- Administrative Fees: This covers the "paperwork" side of things, claims processing, customer service, and the network of doctors (usually a big national network like a Blue Card PPO).
- Stop-Loss Insurance: This is your safety net. If one of your employees has a catastrophic health event (like a major surgery or a chronic illness), this insurance kicks in so your business isn't on the hook for massive bills. It caps your risk.
- The Claims Fund: This is the magic bucket. This money is set aside specifically to pay for your employees' doctor visits, prescriptions, and lab tests.
The "Cheat Code" Moment: At the end of the year, if there is money left over in that third bucket (The Claims Fund), the insurance company doesn't just keep it. They give it back to you. You might get a check for 50% or even 100% of that surplus, or it can be used to lower your premiums for the next year.
Why Haven't I Heard of This Before?
For a long time, these types of plans were only available to Fortune 500 companies with thousands of employees. Carriers didn't think small businesses were "stable" enough to handle the structure.
However, the market has shifted. Today, we can help businesses with as few as 5 or 10 employees (depending on the state and the carrier) access level-funded plans. At Total Benefit Solutions Inc, we’ve seen small shops save anywhere from 10% to 20% on their baseline costs just by making the switch.
Level Funded vs. Fully Insured: A Quick Comparison
| Feature | Fully Insured (Standard) | Level Funded (The "Cheat Code") |
|---|---|---|
| Monthly Payment | Fixed | Fixed |
| Unused Claims Money | Carrier keeps it all | You get a refund or credit |
| Data Transparency | None (You have no idea what's being spent) | High (You see exactly where the money goes) |
| Taxes & Fees | Higher state premium taxes and ACA fees | Often exempt from many state taxes (ERISA regulated) |
| Pricing Basis | "Community Rated" (Based on everyone in your area) | "Underwritten" (Based on your actual team's health) |
Dr. Ben E. Fitz Benefit Tip
Dr. Ben E. Fitz's Benefit Tip: Level Funding is really about taking control. In a traditional plan, you’re paying for the "bad luck" of every other company in your zip code. With Level Funding, if your employees are making healthy choices and using their benefits wisely, your business is the one that gets rewarded, not the insurance company's bottom line.
Is Level Funding Right for Your Business?
While we love this strategy, it isn't a "one-size-fits-all" solution. Because these plans are based on the health of your specific group, your employees will usually need to fill out a brief health questionnaire (don't worry, it's HIPAA compliant and we handle the heavy lifting).
You are a great candidate for Level Funding if:
- You have between 5 and 100 employees.
- Your workforce is generally healthy (or at least stable).
- You are tired of "black box" renewals where you don't see the data.
- You want a chance to get some of your premium back at the end of the year.
It might not be the best fit if:
- Your group has several members with very high-cost, ongoing medical conditions (though we should still look at the numbers to be sure).
- You have a very high turnover rate.
The Total Benefit Solutions Advantage
Choosing the right plan is only half the battle. You need an advocate who knows the "underwriting" game. At Total Benefit Solutions Inc, we don’t just take the first quote a carrier gives us. We shop the market, compare the stop-loss contracts (the "fine print" that protects you), and fight to make sure you’re getting the best possible "cheat code" for your budget.
We act as your independent broker, which means we work for you, not the insurance companies. If a claim gets stuck or a carrier says "no" to a refund you’re owed, we are the ones who get on the phone and stay there until it's fixed. We never accept "no" as an answer when it comes to our clients' benefits.
Ready to see if you're eligible for a refund?
Don't wait until your next 15% increase hits your desk. Let's look at your current plan and see if a level-funded option could save you thousands this year.
Contact us today for a free benefit analysis.
Website: www.totalbenefits.net
Phone: (215) 355-2121
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