Level-Funding vs. Self-Funding
At 90 Degree Benefits, we understand that choosing the right healthcare funding model can significantly impact your company’s bottom line and employee satisfaction. When evaluating healthcare plans, two popular options often come up: level-funding and self-funding. Both offer ways to manage healthcare costs effectively, but they differ in how risks and expenses are handled. Let’s break down these two options to help you determine which is best for your business.
What is Level-Funding?
Level-funding is a cost management approach where businesses pay a fixed monthly amount that covers expected claims, administrative costs, and stop-loss insurance. This model combines aspects of fully insured plans and self-funding, offering businesses a more predictable cost structure while still allowing for potential savings. Level-funding is also a great option for businesses under a fully insured plan looking to transition to self-funding.
At the end of the year, if claims are lower than expected, businesses may receive a refund or credit. This helps companies save money while mitigating financial risk with stop-loss insurance, which protects against high-cost claims.
Benefits of Level-Funding:
- Predictable monthly costs
- Potential refunds if claims are lower than expected
- Protection against large claims with stop-loss insurance
- Customizable to fit the needs of employees
What is Self-Funding?
Self-funding allows businesses to directly pay for employee health claims rather than paying premiums to an insurance company. Companies work with a third-party administrator (TPA) to manage claims, giving them more control over their healthcare plans. Since businesses must bear the financial risk of covering claims as they arise, stop-loss insurance is purchased to protect against large, unexpected claims.
Benefits of Self-Funding:
- Full control over healthcare plans and claims management
- Potential for cost savings by bypassing insurance premiums
- Flexibility in plan design and implementation
- Access to health data and insights allowing for strategic cost containment
Choosing the Right Plan for Your Business
When deciding between level-funding and self-funding, businesses should consider their size, risk tolerance, and financial stability. At 90 Degree Benefits, we help employers navigate this decision by offering both level-funded and self-funded solutions to ensure your health benefits strategy aligns with your needs.
When to Consider Level-Funding:
- Small to medium-sized businesses looking for predictable costs
- Companies seeking to slowly transition from fully insured to self-funding
- Businesses that want cost savings without taking on too much risk
When to Consider Self-Funding:
- Medium to larger-sized businesses with stable cash flow and the ability to manage higher risks
- Employers wanting full control over plan design and claims management
- Companies prepared for unpredictable claims and the flexibility to adapt
How 90 Degree Benefits Can Help
At 90 Degree Benefits, we specialize in providing both level-funded and self-funded solutions, along with a broad portfolio of other funding models to help businesses manage their healthcare costs effectively. Whether you’re a small business looking for cost predictability or a larger employer needing flexibility, we offer solutions tailored to your needs. Our team of experts will guide you through the process, ensuring your business and employees receive high-quality healthcare while optimizing costs.
Choosing between level-funding and self-funding requires careful consideration of your company’s size, financial situation, and risk tolerance. Both models offer distinct benefits, but the right choice depends on your unique needs. With the support of 90 Degree Benefits, you can make an informed decision that ensures both your business and employees have access to the best healthcare at the right cost.
Ready to explore your options? Contact us today to learn more about how we can help optimize your benefits strategy.