For some health plans, this subject is old news. They started a level funding plan years ago to capture some of the group membership erosion they were projecting. However, for some health plans, level funding never really passed the approval process or got the endorsement of upper management. Now that the plan can see the erosion of their group market in the 25-100 EE size range, they want to start a level-funded plan.
Some pitfalls to be aware of are:
1. It is not like traditional self-funding. The landscape is littered with MGUs, carriers, and health plans that thought they could easily adopt self-funded underwriting principles and ‘Voila!’, they would have a successful level-funded program.
2. It is different from fully insured underwriting. Approaching groups with a fully insured mindset can lead to tremendous losses.
3. If you choose to outsource underwriting, choosing a partner with a successful track record is vital. Additionally, having a partner who takes some risk and shares in the reward seems to lead to the best results.
4. It doesn’t seem enough to choose risk partners and count on administrative fees and Rx rebates for revenue.
5. Self-funded is largely regarded as flexible for the employer. Allowing flexible benefits in your level-funded program for groups 25-100 EEs will likely give too much complexity to the administration. Choosing a few options to allow employers to choose from, so that set-up and administration is streamlined seems to function better.
6. Something to remember is how TPAs shape their quotes. They typically have a low fixed cost that includes eligibility and claim processing. Many of their fees are variable and only highlighted in the quote. You’ll want to think about how to shape your quotes in a similar fashion.
If you would like to discuss your level funding initiative, reach out to DuNord for a free, no-obligation consultation.
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