Adopting a level-funded health plan: 5 steps that may help employers save up to 15% or more on health care costs

When it comes to offering health benefits to employees, employers have two primary goals: improving coverage and lowering costs.

Achieving those goals may help encourage a healthier workforce, while reducing absenteeism and presenteeism, both of which can sap productivity and make an employer less competitive. Importantly, medical care ranks are the second largest expense for employers, so it is vital employers maximize the value of their health benefits. 

Rather than watching health plan premiums go up year after year, what if employers could cut costs by up to 15% or more compared to their existing benefits package? While that might sound too good to be true,  the growing popularity of level-funded plans is making that possible for some employers when they move from fully insured plans. A recent report found that 42% of small firms use a level-funded plan, up from just 7% two years ago.

To help employers, especially small and mid-size businesses, navigate the transition from fully insured to level-funded health plans, here are five steps to consider:  

1.     Evaluate your plan options. Historically, employers often selected either a fully insured plan or, as companies grew larger, they moved to a self-funded (ASO) arrangement, which yielded potential savings, but came with additional financial risks if medical costs exceeded expectations. A third option more employers have recently adopted is a level-funded plan, which offers the potential savings available through a ASO approach, but with less financial risk. In short, employers with level-funded plans pay a fixed monthly fee to cover claims, administrative fees and stop-loss insurance, which help protect against unexpectedly large claims. If medical claims are lower than expected, the employer can potentially keep some of the surplus refund at year end.

2.     Request an underwriting analysis. Employers can request an underwriting analysis to review their company’s previous medical claims and other factors to help determine if upfront savings would be a viable option for their business. This can be coordinated by an insurance broker or by connecting directly with UnitedHealthcare. Generally, employers with relatively younger and healthier workforces may save the most. In fact, employers with UnitedHealthcare Level Funded plans on average paid 18% less than for comparable fully insured plans.1

3.     Invest in wellness. Once an employer opts for a level-funded plan, it is important to help employees and their families play a more active role in their well-being. For instance, introducing a digital weight loss program can equip employees with resources to create lasting behavior change. Encouraging employees to get or stay active may help build a culture of wellness while reducing the prevalence of costly chronic conditions, such as diabetes or heart disease.

4.     Leverage other types of technology. Employers with level-funded plans should include coverage and resources related to virtual care. That’s because virtual care, also known as telehealth, may offer employees a more convenient and affordable way to access medical care, including primary, urgent and behavioral care, and chronic condition management. In addition, unlike with most fully insured plans, employers with level-funded can receive detailed monthly data reports to help them better understand how employees are using their health benefits. This can enable tailored clinical interventions and communication campaigns, including to help reduce avoidable emergency department visits and the use of out-of-network care providers or facilities.

5.     Integrate additional benefits. Employers moving to a level-funded plan should continue to take a whole-person approach to health benefits, including maintaining or adding coverage for vision, dental, hearing and behavioral health services. Research shows a link between overall health and oral, eye and hearing health, including a connection to various chronic medical conditions. Plus, companies that combine medical coverage with specialty benefits through a single health care company may be able to save up to 4% on medical premiums2, as well as leverage data to help improve health outcomes, flag gaps in care, drive productivity and reduce costs.

By considering a move to a level-funded plan and adopting these additional strategies, employers may make offering medical coverage to their workforces more affordable and personalized.