The level-funding approach to employer medical stop-loss, part 2: considerations for a successful offering

Since the passage of the ACA, level-funded stop-loss has been an increasingly enticing product for both employers and carriers. Smaller employers with fully-insured medical plans are attracted to the level-funded product’s self-funded features, including lower premium taxes, more control over plan designs, the expectation of sharing in favorable experience, and the access to plan experience data which can be scrutinized for cost containment possibilities.  The percentage of covered workers in small firms (3-199 lives) with a level-funded or self-funded plan grew from 24% to 31% between 2019 and 2020.

As market demand continues to grow, carriers and health plans with fully-insured blocks of business are seeking entry to the level-funded market as a defensive strategy to protect the erosion of their inforce business. Carriers are pursuing this strategy to preserve both premium volume and loss ratios because the fully-insured employers with the most favorable experience make the best candidates for conversion to level-funding. Additionally, health systems that have not traditionally pursued risk with their ASO products are considering a level-funded product offering to expand membership and extend their cost containment services.