Hey, guys. Andy Yost here from the Hummel Group, Benefits Risk Advisor and today, I want to share with you funding strategies that are available to you and your business.

So when it comes to how your health plan is funded, there are several options available to you. The three main funding strategies we're going to cover today are fully insured, level funded, or sometimes you hear them called mini self funded and self funded insurance.

In this video, I'll give you a brief overview of these three funding strategies and how they differ.

So let's look first at fully insured. In this funding strategy, the insurance carrier assumes all of the risk. Employers are billed on a monthly basis for premium in exchange their employees have medical coverage. They get an ID card, they go to the hospital, they can present it, and they have coverage.

From a risk standpoint, this offers employees the least amount of risk as all the risk is transferred to the carrier. However, there is little to no transparency as to how these premium dollars are being used. What that means is businesses could be paying a premium amount that is greater than the amount of claims a carrier may pay out in a given year.

Strategy number two, level funded or again mini self funded. This strategy often looks like, feels like, and smells like a fully insured health plan in that the business pays a set premium amount monthly for their health coverage. The difference is how these dollars get allocated behind the scenes or on the back end.

Some of these dollars get set aside for administrative fees, some dollars get set aside for reinsurance fees and other costs. These are known as your fixed costs. Other dollars are then set aside to pay for claims as they are incurred. These are known as your soft costs. So these dollars are prefunded to the max you may hear sometimes.

At the end of the plan year, on a level funded funding strategy, If there are any dollars remaining in that claims bucket, if you will, an employer can get a portion of these dollars back in the form of a refund, rebate, or return.

Strategy number three, self funded healthcare. On a self funded plan, the business incurs the risk albeit with certain caps. Like level funded plans, there are fixed costs that cover things like administrative fees, stop loss insurance, things like that. However, the bulk of the cost is in the unknown claims that may be incurred throughout a planned term. Employers are then responsible for covering those claims for their employees up to certain limits.

That was just a quick high level overview of the three main funding strategies.

There is one other strategy that employers can utilize known as an ICHRA or an Individual Coverage Health Reimbursement arrangement.

For more on that, check out my video on health reimbursement arrangements.