How alternate funding works

The number one concern for small-business owners is the cost of health care.1 So, All Savers Alternate Funding plans were built with your small business in mind. They're intended to help save you money - and help your employees get more out of their plan, too.

Traditional insurance is a fixed cost

With traditional plans, a small business pays a fixed premium to the insurance company, and then the insurance company pays the health care claims as well as the administrative costs, sales commissions, and taxes.

If the actual health care claims are higher than expected, the insurance company covers it. But if the claims are lower than expected, the insurance company keeps the difference. This means your company doesn’t get anything back if your employees have lower-than-expected claims.

All Savers Alternate Funding plans are different

With All Savers Alternate Funding, if the actual health care claims are lower than expected, your plan shares in the savings with some money back at the end of the year. And if the claims are higher than expected, your stop-loss insurance policy covers it.

Here are a few additional benefits to an Alternate Funding self-funded plan:

  • The plan is a “level-funded” plan, so your company will make the same monthly claims funding payment throughout the plan year. And you won’t have to pay any more at the end of the plan year, even if you have high claims costs.
  • Self-funded medical plans are not subject to most state insurance mandates or state insurance-premium taxes, which can mean lower costs throughout the year. (However, stop-loss coverage is still subject to premium tax.)

Best case: Low claims

Your company's monthly payments include the estimated health care claims plus the fixed-cost items (administrative fees and stop-loss insurance premium). This is called your plan's "maximum liability," which means you won’t get stuck at the end of the year with any additional unforeseen costs.

Part of your monthly payments will go into an account that pays for your employees' eligible claims. At the end of the year, the monthly payments will be compared with the actual costs. In the best-case scenario, the actual claims costs for the year would be less than was estimated, which means your plan would have a surplus.

A portion of any surplus is sent back to your plan to use the following year, and a portion is kept as a deferred service fee (where allowed by state law).

Worst case: High claims

In the worst-case scenario, the actual claims would be higher than expected. But because your plan would have already paid the maximum liability, you won't pay more at the end of the plan year.

Your plan is protected by the stop-loss insurance that is already built into your monthly payments.

Of course, each year will be somewhere between the worst case and best case. But in any case, many small businesses could save with an All Savers Alternate Funding plan.

Why All Savers

 All Savers consumer-driven health plans are designed to meet the challenge of rising health care costs by offering flexibility and options with an Alternate Funding plan.

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Footnotes

  1. Small Business Trends, Top 10 Challenges Small Business Owners are Facing Today, 2017.