Premiums can be 20% to 25% less for level funded plans than comparable community-rated plans………….An employer’s savings depend on the health of its employees and their families because an LFP plan is underwritten only for the specific employer’s employee population and not for a broader community.
More small businesses turn to level funded health plans to manage health care benefit costs
Employers are finding that they may be able to slow potential increases, or perhaps reduce their premiums, through insurance based only on the coverage used by their employees and their families.
By Jim Molis – Contributor – Atlanta Business Chronicle
Nov 6, 2020
Businesses are pursuing alternatives as they seek to manage the costs of providing health care benefits for their employees.
Employers are finding that they may be able to slow potential increases, or perhaps reduce their premiums, through insurance based only on the coverage used by their employees and their families. Self-funding plans are a common coverage choice by large companies, and similar alternatives are options for small businesses.
“Level-funded plans, offer employers the ability to create a plan that works for them by qualifying based on their own risks,” said Gary Davis, associate vice president and small group practice leader for Humana. “It also gives them the opportunity to save on health care expenses through the benefits of self-funding while limiting exposure to unforeseen costs through stop-loss insurance.”
Level funded plans, such as the Level Funded Premium (LFP) offering from Humana, are designed to pair with any standard medical plan that many small businesses are already familiar with – but with lower rates and more financial flexibility, in part resulting from employers being rated on the health status of their employee population, as opposed to community-rated.
Thirteen percent of small firms (with three to 199 employees) are in a level funded plan, which combines a relatively small self-funded component with stop-loss insurance that protects an employer from excessive claims, Kaiser Family Foundation researchers noted. The percentage of covered workers in small firms that reported that they were in a plan that was either self-funded or level-funded increased to 31% in 2020 from 24% last year.
Level funded health plans gain traction
“There’s an ability to have greater plan flexibility with LFP than community-rated,” said John Dammann, market vice president for Georgia for Humana. “Right now, the market is dictating what plan designs are affordable.”
Premiums can be 20% to 25% less for LFP plans than comparable community-rated plans, Dammann said. “LFP continues to be our go-to flagship product for companies in the 2- to 50-employee space,” he said. Humana launched its first LFP plan in Georgia in 2017. “As the years have gone by, the adoption and the interest have increased.”
Many Humana customers switch from traditional coverage to LFP plans when their benefits come up for renewal. “Reduced pricing is very hard to do without these level funded products,” said Sheila Butler, owner of Sheila J. Butler & Co., a health insurance broker in metro Atlanta.
Rivers Pools & Spas, a Carrollton, Ga.-based pool company and Humana customer, reduced its total monthly premiums by 3.21% when it switched from a community-rated plan to an LFP plan in March. The community-rated renewal plan for Rivers Pools was due to increase by 17.38%, Butler said.
“Employers expect renewals to be high, especially during Covid. So, any time you can take a negative increase to an employer, you make them happy,” Butler said. “They feel that they can continue to offer coverage. And that’s important because employers say they can’t attract employees without offering them a good health insurance plan.”
The benefits that Rivers Pools employees receive under the company’s new LFP plan are similar to what they had under their previous plan that was due to be renewed. “But the difference was the level funded pricing provided savings,” Butler said.
An employer’s savings depend on the health of its employees and their families because an LFP plan is underwritten only for the specific employer’s employee population and not for a broader community. The healthier the members of the LFP plan are, the more an employer can save in premiums. An employer may receive a refund of premiums if it pays for more coverage than the members of the LFP plan use.
Application process differs for LFP plans
Not every employer qualifies for an LFP plan. “If there are health risks within your group, you can be turned down,” said Butler.
Davis said Humana underwriters develop an accurate rate for a potential group’s profile using employer demographics (location and industry), member demographics (age, sex, family status), and member medical histories and disclosures. This allows Humana to price the stop-loss premium and establish a claims fund customized to each group, he added. A group’s monthly premium pays its stop-loss insurance, claims fund and administration fee.
In the case of Rivers Pools and Spas, the switch from a traditional plan to an LFP plan could not have come at a better time. The company started paying its reduced premiums in April, just in time to improve cash flow for the Covid-19 pandemic. “Covid has put financial stress on almost every business,” Dammann said. “Business insurance consultants have used LFP as a positioning tool to teach their customers that there are potential ways to save on health care spending if you qualify.”
Though LFP plans offer companies regular and predictable health plan costs while only paying for the health care costs incurred by employees, employers should understand if this solution is right for their business. For example, employers should know how health risks among their employees and family members affect premiums, understand how stop-loss insurance works and grasp how monthly payments are calculated.
“LFP represents a sophisticated buy by the employer,” Davis said. “But with the right broker and the right adviser, this creates a significant opportunity for employers to save.”
To learn more about the products that Humana offers to improve the health of your employees and your bottom line, visit humana.com/employer to contact a licensed Humana sales agent.
Humana is committed to helping its millions of medical and specialty members achieve their best health. Its successful history in care delivery and health plan administration is helping create a new kind of integrated care with the power to improve health and well-being and lower costs.
This material is provided for informational use only and should not be construed as medical, legal, financial, or other professional advice or used in place of consulting a licensed professional. You should consult with an applicable licensed professional to determine what is right for you.
This communication provides a general description of certain identified insurance or non-insurance benefits provided under one or more of our health benefit plans. Our health benefit plans have exclusions and limitations and terms under which the coverage may be continued in force or discontinued. For costs and complete details of the coverage, refer to the plan document or call or write Humana, or your Humana agent or broker. In the event of any disagreement between this communication and the plan document, the plan document will control.
Jim Molis is a freelance writer with The Business Journals Content Studio.
