These days if you have 20-49 employees, offering employee health insurance is expected and frankly, necessary to attract and retain a quality workforce. However, group health plans can be expensive and seem out of reach for small businesses. Here is where a level premium plan may be a good option.
In the group health world, there are two ways to fund a plan – fully funded by the insurance company, or self-funded by the employer. In the fully-funded model, the employer writes a big check each month to the insurer who manages all levels of claims. A self-funded (or level premium) plan has the employer take on some of the risk associated with the cost of employee health coverage in exchange for a lower premium. Part of the employer’s monthly payments is placed into a fund to cover expected claims, which are processed by the insurance company. Those premiums also cover stop-gap catastrophic event insurance in case an employee has a large, unexpected health event. Both types of plans offer co-pays, HSAs, wellness programs, etc.
Employers with a young, healthy workforce can benefit from the lower cost of a level-premium plan. Also, there is incentive to offer wellness programs and rewards to help keep expensive claims from popping up. The idea is to save on employee health costs while you can.
One downside to level-premium plans is that if an employer ends up with a large claim during that year, the renewal price can skyrocket 50-60%, where the fully-funded plans typically see 6-8% increases yearly. If this situation does arise, the employer will simply roll back into an ACA group plan at renewal time since they are guaranteed issue products. An experienced insurance broker (like Wharton & Power Insurance) can review other options as well.
It may be that you can be shielded for a bit from the huge premiums you have found in your employee health insurance research. Reach out to us to set an appointment to discuss your options. Send us an email or give us a call at 317.663.4138.
