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What is Your Healthcare Coverage Strategy?

By Jeremy Mclendon,

Healthcare is one of the most expensive line items on your balance sheet. Yet, for decades now, small businesses have been conditioned to look at health insurance in 12-month intervals instead of a long-term strategical lens. What if there was a way to look at health insurance as a vehicle to sustainably lower long-term operational costs?

Most employers have a strategy for growth, for sales, for their workers’ comp/business insurance, and everything in between, but not health insurance. Large companies have the resources and infrastructure on their side to help control healthcare costs. They also have carriers and brokers at the ready offering them preferential treatment. All the while, small businesses question if they can even afford to provide health insurance.

As a small business, it’s understandable that you have not had the time or the resources to dedicate to establishing and adhering to a strategy to lower your healthcare costs. Luckily through the American Gem Society, you now have the tools and the expertise to do so! So, the question isn’t how do I pay the lowest amount over the next 12 months, but what do I do to lower my long-term costs in the coming years consistently?

One way to lower healthcare coverage costs is by looking at plan options like level funding. Level funding is an out-of-the-box risk financing vehicle that is a stepping stone between fully-insured and self-insured options. Level funded plans typically include four main components: administrative costs, individual/aggregate stop-loss coverage, and claims. (We know this may sound confusing; we promise to explain.)

Level-funded plans give small businesses the freedom and autonomy of self-insurance with the financial protection of a fully-insured plan. The company funds its small claims to the carrier monthly at their maximum liability. If the insured exceeds that maximum, the carrier steps in and covers the payments. This is known as your “stop loss.”

At year-end, the carrier audits the insured’s incurred small claims vs. the amount funded throughout the year to see if there is a surplus or deficit. If there is a surplus, the employer can receive some of the unused claim funds back! A team of proactive experts, a bundle of supplemental tools, and employee educational content throughout the year can help you adhere to your strategy and see a potential return of claim funds.

Level-funded plans deliver several benefits for small employers: cost savings, plan design flexibility, less red tape bureaucracy, lower health insurance taxes (employer facing), and access to claims data. How can this help you realize the strategy you need?

Claims are the holy grail to determine whether your insurance carrier is profiting off your employees or whether you are costing them money. Most carriers refuse to share this information if you are a small business. When you have access to your claims, it makes creating a healthcare coverage strategy simple.

Level-funded plans offer flexibility that is unmatched by its fully-insured counterparts. There are fewer restrictions on what an employer can do with a level-funded plan, offering you flexibility with plan designs. Having more freedom with a level-funded option makes you more likely to have plan continuity year to year, which would not restrict access to care for your employees. Furthermore, you get increased flexibility with improved cash flows throughout the year by funding your claims in small increments (without paying the fully-insured overhead of an insurance carrier). If those things weren’t enough, level-funded plans also allow employers to lower their state health insurance taxes!

If you are a small business and are tired of the cookie-cutter, overpriced fully-insured options, level funding could fit your needs. Through, you have access to learn more about your healthcare coverage options and speak with a licensed consultant to see if level funding could help you build the right healthcare coverage strategy.