How do I compare two level funded quotes?

With level funding growing so much in popularity, digging deeper than the total rates is more important than ever. Not all level funded products are close to the same, even at the same annual premium.

Quick refresher on how it works. You pay a fixed monthly amount that covers admin, stop loss, and a claims fund. If claims run high, stop loss catches it. If claims run low, many plans give back part of the surplus. I call it self-funding with training wheels.

Here's what most comparisons miss:

How much of your premium goes into the claims fund. You want as much as possible there, because those are the only dollars eligible for a surplus refund. Some carriers quote with about 50 percent of premium in the claims fund. Others put 60 to 70 percent there.
How much of the surplus you get back. Carriers return 50, 67, or 100 percent of unused surplus.

Stack those two differences together and the gap can be hundreds of thousands of dollars, with no change to your rates, your plan design, or your carrier.

The other watch-outs: refund terms vary a lot, some plans re-underwrite you hard at renewal, and claims reporting is not always as complete as it should be. Read the surplus and termination language before you sign. This is exactly why I push for a due diligence conversation every so often, so you are not leaving dollars on the table.

Questions to ask

What percentage of our premium goes into the claims fund?
What percentage of unused surplus is returned, and when?
What happens to our rates at renewal if we have a bad claims year?

Fully insured, level funded, self-funded, or captive. Which is right for us?

It depends on who you want holding the risk. Fully insured is the simplest and least transparent. Level funding is the usual first step for a healthy group and is most common under 200 employees. Self-funding gives you all the data and keeps the surplus, in exchange for volatility. A group captive gives self-funded employers the same economics with less volatility by sharing a middle layer of risk with peers.

Should we self-fund through a big carrier or an independent TPA?

A carrier ASO bundles the network, PBM, care management, and often stop loss into one vendor, which means strong network contracts and simplicity but less flexibility and less data. An independent TPA lets you pick each piece separately and gives you full claims data, with more moving parts. Spread-out workforces that want simplicity usually fit a carrier. Concentrated workforces that want control usually fit a TPA.

What is a group captive, and who is it for?

A group captive lets a set of like-minded self-funded employers share a middle layer of risk. Each employer pays its own smaller claims, the captive pools the mid-size claims across members, and a reinsurer covers the catastrophic layer. It is self-funding with less volatility, and it works best for employers committed to managing cost.