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Level-funded health plans are a great alternative to fully insured group health coverage, but the plans can be confusing.
Related: Is level-funding right for your clients?
Susan Rider and David Smith, representatives from the National Association of Benefits and Insurance Professionals, are preparing to give state insurance regulators that message next Tuesday in Minneapolis, at the summer national meeting of the National Association of Insurance Regulators.
NABIP would like to see state regulators set standard definitions for level-funded plan contract terms such as "administrative" and "stop-loss," according to a slidedeck included in an NAIC working group document packet.
Regulators should also help make sure the plan sponsors get the information they need to understand what's happening inside the plans, according to Rider and Smith.
Plan administrators, pharmacy benefit managers and other service providers should have to give clear information about how they're paid, and the employers should also see detailed information about matters such as the gaps between billed amounts and paid amounts for each claim, Rider and Smith say.
Rider is the president of NABIP. Smith is the president-elect.
The Employee Retirement Income Security Act Working Group, an arm of the NAIC, is preparing to hear a presentation from them on level-funded plan concerns at an in-person session.
Level-funded plans: States regulate fully insured group health plans.
The U.S. Labor Department's Employee Benefits Security Administration oversees self-insured health plans and tends to set fewer rules.
A level-funded plans is a self-insured plan that comes with enough stop-loss insurance, or insurance for health plans, to protect the employer sponsor from catastrophic losses.
The employer pays separately for a claims reserve account, stop-loss insurance and administration.
The level-funded plan market outlook: Many employers have shifted to use of level-funded plans in recent years to get more control over the coverage and, in some cases, save money by avoiding compliance with some state health benefits mandates.
In 2023, 38% of the workers in health plans with fewer than 200 covered workers were in level-funded plans, according to KFF.
Executives at UnitedHealth have predicted that rising costs for fully insured health coverage will cause more employers to consider adopting level-funded plan designs.
Executives at Voya, a major stop-loss insurance provider, also expect more employers to consider moving to partially or fully self-insured plan designs, with use of stop-loss, but they have emphasized that they will take a disciplined approach to pricing and are not eager to cover employers with small stop-loss budgets and high medical claims.
NABIP concerns: NABIP represents many health benefits brokers and consultants.
NABIP members worry that some marketers suggest that level-funded plans are just like fully insured plans. Those marketers fail to provide enough information about the differences between stop-loss insurance and ordinary high-deductible health insurance, according to Rider and Smith.
In some cases, Rider and Smith say, federal laws or state laws may not be a good fit for level-funded plans.
NABIP also sees employer confusion about some common stop-loss protection exclusions, such as lack of coverage for work-related accidents.
Some employers choose level-funded plans because they think their claims will be low enough that they will qualify for experience-based rebates, but, typically, fewer than 20% of the sponsors actually get experience-based rebates, according to Rider and Smith.
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