What If Your Health Plan Paid You? This Funding Model Is Giving Small Businesses a Lifeline
Philly’s small businesses have never studied their balance sheets more closely than this year—and for many, one particular expenditure may cause the most stress.
“The single biggest concern of most business owners today is the cost of coverage,” says Derek Springer, Vice President of Product, Capability Strategy and Innovation at UnitedHealthcare.
Traditional health plans can eat into the budget, but there’s another type of coverage that may actually put dollars in the revenue column. Alternate funding health plans maintain the same level of coverage benefits as a fully insured plan but may provide a surplus refund to employers if employees’ medical claims stay below a certain dollar amount. In fact, more than a third of UnitedHealthcare alternate funding health plan clients received a surplus refund in 2019 averaging $8,795.
“An alternate funding plan is designed to help businesses make their bottom line that much better,” Springer says. Here’s what you should know about this increasingly popular option that has big potential to boost small businesses.
What is an alternate funding health plan?
Also known as “level-funded” plans, alternate funding plans push beyond traditional insurance plans to give employers new ways to pay for health services, manage costs and help employees get more value from their benefits.
These plans typically use three mechanisms:
- A self-funded medical benefits plan: With this kind of plan, an employer’s premium rate is based on the medical claims experience of only that specific employer’s workforce. If costs for providing health services to the group are higher, the employer pays more; if costs are lower, the employer may get money back.
- A stop-loss insurance policy: An insurance policy that provides coverage for large, catastrophic medical claims by a single, covered individual and provides overall coverage in the event all medical claims go beyond a certain dollar limit.
- A third-party claims administration agreement: An agreement with an administrator to provide claims processing, billing, customer service and other services.
How does an alternate funding health plan work?
Alternate funding plans work by managing financial risk differently. With a traditional plan, the employer pays a fixed premium and the insurance company assumes the financial risk for providing health services in addition to covering administrative costs and taxes. If the actual medical claims are higher than expected at the end of the plan year, the insurer pays them. But if they’re lower, the insurer keeps the difference.
With an alternate funding plan, the employer assumes the financial risk of providing health services to the employer group. These costs may vary from month to month throughout the year. (The employer still pays a fixed cost for administrative fees, the stop-loss premium and monthly maximum claim liability.) At the end of the plan year, if the total medical claims are lower than anticipated, the employer may receive money back (where allowed by state law)1.
Alternate funding plans are typically eligible for lower premium taxes. They’re also exempt from most Affordable Care Act regulations and state insurance mandates.
What should employers look for when choosing an alternate health funding plan?
Simply put, the success of an alternate funding plan depends on the employer and employees’ commitment to living and working healthier. With healthier employees, an employer is likely to save more money over the course of the coverage period.
Choosing a provider with strong wellness programs like UnitedHealthcare can help address the nearly 50 percent of health care costs that stem from chronic or preventable disease.
“These kinds of offerings make it easier for an employer to implement their plan and support and engage their employees in better health,” Springer says. Healthier employees and a healthier business? That’s a change any employer can get behind.
UnitedHealthcare delivers strategies built with the industry’s largest integrated health data platform, a team of more than 30,000 staff clinicians and close collaborations with some of the nation’s leading health systems. Learn more about its All Savers Alternate Funding health plan.
