Now that the American Health Care Act has failed to advance, small businesses, and the brokers who serve them, are looking for ways to manage health care costs within the status quo of the Affordable Care Act (ACA).

As it did with individuals, the ACA community rating methodology benefitted some while burdening others. The community rating methodology spreads the costs associated with the differing risk of group (or individual) profiles over the entire risk pool. In the case of small groups, older and/or sicker groups benefitted from lower rates while younger and/or healthier groups pay more. Those small groups for which this “peanut-buttered” risk solution has resulted in increases to their health insurance may want to look at level-funded plans, an alternative to fully-insured plans.

Large groups have long been able to self-insure their health care coverage. Under a self-insured plan, employers directly cover the costs of their employees’ medical expenses. The employer is not subject to all of the required coverages, or essential benefits, that are core to the ACA. And, the employer is covered against extraordinary costs through participation in an insurance captive or through stop-loss insurance. Small groups, however, have not had the scale, systems, process or sophistication to self-insure. In short, it has been too onerous and risky for them to self-insure. Enter level-funded plans.