Level Funding (Partial Self Funding) For Groups Down to 5 Employees

Jun 4, 2018

  1. rcduggan
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    rcduggan Super Genius

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    • what state are you writing in?
    • what fully insured carrier has the group originally and what kind of benefit plans are you stepping off to see this type of reduction in premium?
    • where are you writing your self-funded business? starmark was not competitive last time i gave them a go 3 years back or so. i like another operation that has really pulled back my eyelids to self-funding and what's available.
    i have found nothing less than 10 to be cost-effective and even at 10, i waver on the idea because i am not seeing the type of premium savings you speak of. i slice and dice the benefits bottoming the heck out of the self-funded plans but i am not seeing your results. Benefit Guy above your comment mentions rates better than fully insured. this hasn't been accurate in my experience with anything less than 10 or at least in year 1. maybe i am missing the picture rolling through 3-5 years of renewals with the both of your savings comments. thank you in advance for your input
     
  2. Mike Siegal
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    Mike Siegal Super Genius

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    Do you really save anything with Self-Funded? (also, what about the danger of 'large claims?' and there impact on small business? Self-Funded and less than 20 life's with excellent track record AND even Young Employees, seems risky.
     
    Last edited: Mar 13, 2019
  3. Benefits Guy
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    Benefits Guy New Member

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    Self-Funding on average saves about 20% over a fully insured plan with a reasonably healthy group. The danger of a shock loss (large claim) is why you have the stop-loss coverages in place. With level funding, the carrier assumes the risk of any deficit in the claim reserve account, so there really is no risk for the client as far as claims go. If claims are better than projected, the client gets all or a portion of the excess refunded to them depending on their contract.

    The real challenge with these level funded plans for small groups is getting it set up in the first place. It's not nearly as simple as signing up for fully insured plan where the only thing you really need is a census. Since you won't have any claims experience data, everyone that wants to be covered will have to complete a health survey. That process can be a real pain in the neck, but if everything comes back acceptable you can save your client a good deal of money. Now if your group turns out to be not a healthy as projected, where that will catch up with you is on the renewals. In which case you take them back to a fully insured plan if the rates jump to high on you. Worst case scenario is that the client enjoys a couple of years of lower rates than they would of otherwise had.
     
  4. Mike Siegal
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    Mike Siegal Super Genius

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    Thanks for the Input.

    I know little on the subject of group.

    'Whats the chief complaint of doing a Health Survey?'
     
  5. Benefits Guy
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    Benefits Guy New Member

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    Two issues, 1) Any employee that potentially might enroll needs to do one (info on dependants that might go on as well), so at times it can be an exercise in herding cats. 2) The employees will not know what their rate will be at that point, so their doing the surveys blind.

    Once complete though, the carrier can underwrite the risk and set a rate. Here's the catch, that rate can change depending on who takes the coverage. So if the employee rate comes in high (employer subsidy factors into this greatly as well), some of the employees will opt out. Employees with health issues aren't doing that, so it's the healthy ones that drop and in turn drives up the rate. Which in turn may drive yet more healthy employees to opt out. There's definitely an art to successfully putting one of these plans in place.
     
  6. rcduggan
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    rcduggan Super Genius

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    First, Benefits Guy has a great points. One of my goto self-funded admins allows me to quote prior to health questionnaire. But obviously, once those questionnaires come back, underwriters go to town and can move rates up or down. Self-funded approach described as an art is spot-on too. As with nearly every segment of our business (L&H), you must know your client and how to assess the situation and propose a solution. Self-funded kicks butt to me but not all employers are on-board with the idea OR things may happen as life does, which if it does can adversely effect the rates and you move back to fully-insured. Be advised, you do write a self-funded group, they will be locked-in for a year.

    Addressing your comment, 20 lives with excellent track record (assuming this means claims history), and young is exactly where a self-insured plan will blow the doors off fully-insured plans.
     
  7. rcduggan
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    rcduggan Super Genius

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    the employee doesn't want his/her employer or anyone for that matter knowing what they may be dealing with, if you know what i mean.
     
  8. ABC
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    ABC Guru

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    I write All Savers, Starmark, Medova (shady), National General & IHC.

    My guess is that CA has restrictions with reinsurance for small groups.
     
    ABC, Mar 14, 2019
    #18
  9. rcduggan
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    rcduggan Super Genius

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    it does have restrictions, yes. i've explored starmark handful of years ago and more recently enjoyed working with NGIC
     
  10. newera
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    newera Expert

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    I would get a quote from TriNet. They have very good rates for the tiny groups under ten employees. I crush them on groups over ten employees.
     
    newera, Apr 23, 2019
    #20
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