HOW IS A LEVEL FUNDED PLAN DIFFERENT FROM A FULLY INSURED PLAN?

Monthly premiums under a fully insured plan are locked in. Even if a group is healthy with limited claims, the savings are kept by the insurance company.

With Level Funding and the smart use of stop loss coverage, employers pay a monthly cost WHICH IS THE MAXIMUM COST. No matter how high claims are in a particular month employers will never pay more than this maximum monthly cost.

After all claims are paid for the year should there be any unused money remaining in the claim fund this amount will be RETURNED TO THE EMPLOYER per the contract terms

DEFINED AND CONTAINED RISK

Actual risk is defined to the penny. Employer’s maximum exposure and annual costs are determined up front through the purchase of stop loss insurance. Standard provisions still apply including coverage for claims paid AFTER THE END OF THE PLAN YEAR- (NO RUN OUT 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 coverage will advance the necessary funds (also referred to as “Accommodation”). Should the plan have a shortfall NO ADDITIONAL FUNDS WOULD BE REQUESTED.

PLAN DESIGN FLEXIBILITY

With level funded plans the employer has significant control when deciding on plan coverage options and exclusions. Plan documents can be customized to meet the employer’s needs and goals.

CLAIM FUND

Maximum annual claims costs are predetermined.

The employer pays 1/12 of this cost each month for the 12 months of the plan year; UNUSED DOLLARS IN THE CLAIM FUND ARE RETURNED TO THE EMPLOYER.

PLAN YEAR AND TERMINAL LIABILITY

The plan year runs for 12 months from the plan effective date. Claims incurred during the plan year will be paid through A 9 MONTH RUN –OUT PERIOD. Any balance in the claim fund is returned to the employer. TERMINAL LIABILITY COVERAGE IS BUILT INTO THE PLAN BY PROVIDING THE 9-MONTH RUN-OUT PERIOD.