Streamlining Healthcare Benefits for Businesses

Learn about the evolving landscape of employer-sponsored healthcare, focusing on the prevalence of self-funded plans, the emergence of level-funded options, and the simplicity of HRAs.

May 3, 2024

Self-Funded Plans Provide Cost Protection

Self-funding, where businesses directly cover healthcare expenses rather than purchasing traditional insurance, is widely adopted, particularly among larger companies. Self-funded plans are utilized by 65% of covered workers, with 18% from small companies and 83% from large companies.

In the large group market, self-funding is a predominant strategy

The self-funding approach has surged in prominence within large group markets (1,000+ lives), primarily driven by its cost containment effectiveness and comprehensive control over healthcare expenditures. Businesses value the flexibility inherent in self-funding, allowing them to tailor cost-saving measures and benefit structures to align with their unique needs and workforce demographics.

By assuming entire health risks, companies gain autonomy over their risk pool, enabling them to implement risk mitigation and financial optimization strategies. This strategy proves especially advantageous for companies with over 1,000 employees, ensuring economic stability and facilitating precise management of healthcare expenses over the long term.

Self-funding in middle market & small group

For small and medium-sized businesses, the escalating cost pressures are driving a need to explore alternative healthcare options, regardless of their current coverage tier.

However, this market segment often faces unique challenges that make self-funding problematic. With a smaller pool of options, these businesses have limited choices when selecting healthcare plans and providers. Moreover, their heightened exposure to claims experiences poses significant financial risks.

Some smaller and medium-sized businesses are increasingly turning to level-funded plans coupled with stop-loss insurance to leverage the advantages of self-funding while mitigating the associated risks.

Level Funded Plans

Level-funded plans, offered by insurers, provide these businesses with a nominally self-funded option that includes comprehensive stop-loss coverage with relatively low attachment points. By paying a fixed "level premium" amount, employers can anticipate their monthly expenses, with potential reconciliation at the year's end.

This arrangement effectively shields smaller businesses from significant additional liabilities, making self-funding more accessible and less daunting. Additionally, the inclusion of stop-loss insurance serves as a crucial safety net, limiting the financial exposure of employers in the event of unexpectedly high claims.

Through this strategic combination of level-funded plans and stop-loss coverage, smaller and medium-sized businesses can reap the cost-saving benefits and flexibility of self-funding while safeguarding against potential financial uncertainties.

Your guide to flexible & affordable benefits — download now.

Group health can be complex, restrictive, and costly. Liferaft offers something different.

Liferaft's 2023 Whitepaper on HRAs is the most comprehensive guide available, giving you what you need to determine if an HRA makes sense for your business.
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What you get in your guide:
• What is an HRA?
• HRA Requirements & Features
• Eligible HRA Expenses
• When an HRA Makes Sense
• Different HRA Types
• States Where HRA Works Best

Terminology Simplified

Exploring the landscape of employer-provided healthcare starts with unraveling essential concepts such as self-funded, fully insured, and level-funded plans alongside the protective layer of stop-loss coverage.

  • Self-Funded Plan: When an employer takes direct responsibility for paying for their employees' medical expenses. Instead of buying insurance, the employer pays for the medical costs themselves. Sometimes, they might get extra insurance to cover really big medical bills.
  • Fully-Insured Plan: The employer pays an insurance company to take care of their employees' medical bills. The insurance company is responsible for paying the medical costs.
  • Level-Funded Plan: The employer pays a fixed amount each month to an insurance company or another organization. This money goes into a special account to cover medical bills and other costs. If the medical bills end up being less than expected, the employer might get some money back at the end of the contract.
  • Stop-loss Coverage: This acts like a safety net for the employer. It sets a limit on how much the employer has to pay for their employees' medical bills. Stop-loss coverage might cover big bills for each employee, or it might limit the total amount the employer has to pay for everyone's bills in a year.

An HRA Can Be a Simpler Solution

Employers are increasingly turning to self-funded and level-funded plans due to their cost-saving benefits and the ability to have more control over healthcare spending. However, for small and medium businesses, Health Reimbursement Arrangements (HRAs) offer a simpler solution. HRAs provide cost containment and full control over healthcare budgets while giving employees greater flexibility in their health insurance coverage.

HRAs have been around for a few years, and people have been using HRAs or MERPs to structure out-of-pocket coverage. But with ICHRA and QSEHRA, the power for brokers looking to address diverse needs has expanded.

2023 Year-End Report: 
HRA Trends & Insights

Liferaft's 2023 Year-End Report gives brokers and business owners the full breakdown of HRA market challenges, employer concerns, growth opportunities, and more, to help you can stay ahead of the curve.
You will automatically be redirected to your whitepaper download after submission.
This whitepaper includes:
2023 HRA Trends  |  Top Employer Concerns  |  Trends in HRA Account Types  |  Potential Pitfalls & Challenges  |  ICHRA Enrollment Stats & Trends  |  2024 Areas of Opportunity & Growth

Combining HRAs with Level Funded Plans & Stop-loss Coverage

By integrating HRAs into their benefits packages, employers can offer comprehensive coverage for various expenses, including costly treatments like IVF and fertility treatments.

With level-funded plans and stop-loss insurance, employers can safeguard themselves against excessive claims while providing high-value benefits to employees.

This approach allows businesses to tailor their benefits offerings to meet the unique needs of their workforce, offering tax-free funds to cover eligible expenses and providing a user-friendly digital experience for claims submission and reimbursement.

This combination of HRAs, level-funded plans, and stop-loss strategies empowers employers to enhance their benefits packages, attract top talent, and promote employee well-being.

2023 ICHRA Enrollment Went Up—Brokers Should Pay Attention

In 2023, enrollment in Individual Coverage Health Reimbursement Arrangements (ICHRA) experienced a significant increase, indicating a noteworthy trend in the healthcare market. While ICHRA enrollment still may not constitute a major portion of the market, its rapid growth is noteworthy.

In fact, 2023 witnessed a 200% increase in ICHRA enrollment compared to previous years. The number of American workers offered an ICHRA or Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) as a health benefit doubled between 2022 and 2023. This surge underscores the rising popularity and adoption of these arrangements among employers and employees alike.

For brokers operating in the healthcare industry, this upward trajectory in ICHRA enrollment highlights the importance of staying informed and proactive. As these alternative healthcare options gain momentum, brokers must remain attentive and adapt their strategies to effectively navigate the evolving landscape of employee benefits.

Frequently Asked Questions

Why is self-funding prevalent in the large group market?

Self-funding is predominant in the large group market due to its cost containment effectiveness and comprehensive control over healthcare expenditures. Businesses value the flexibility inherent in self-funding, allowing them to tailor cost-saving measures and benefit structures to align with their unique needs and workforce demographics.

What challenges do small and medium-sized businesses face with self-funding?

Small and medium-sized businesses often face challenges with self-funding due to limited healthcare plan options and heightened exposure to claims experiences, which pose significant financial risks. These businesses may explore alternative options, such as level-funded plans coupled with stop-loss insurance, to mitigate risks while leveraging the advantages of self-funding.

What is the role of Health Reimbursement Arrangements (HRAs) in simplifying healthcare solutions?

HRAs offer small and medium businesses a more straightforward solution compared to self-funding and level-funded plans. They provide cost containment and complete control over healthcare budgets while offering employees greater flexibility in their health insurance coverage. HRAs allow tax-free funds to cover eligible expenses and promote a user-friendly digital experience for claims submission and reimbursement.

What benefits do level-funded plans offer employers?

Level-funded plans offer employers a predictable monthly expense through fixed "level premium" amounts while providing potential reconciliation at the year's end. This predictability and comprehensive stop-loss coverage enable employers to manage healthcare expenses effectively and mitigate financial uncertainties.

What was the trend in ICHRA enrollment in 2023?

Enrollment in Individual Coverage Health Reimbursement Arrangements (ICHRA) increased significantly in 2023, with a 200% surge compared to previous years. This upward trajectory underscores these arrangements' rising popularity and adoption among employers and employees.

Book your consult with Liferaft

Our team knows the ins and outs of the health insurance marketplace and will guide you towards the solution that make the most sense for your business and your team. Come with questions! Our experts are happy to dig into the details to get you the clarity you need.

During the call, Liferaft will run a cost-benefit analysis on your company's current healthcare spending and show you different ways you can save—without sacrificing plan quality. After your consult, Liferaft will design a unique plan for your employee's health insurance, including suggested plans and accounts, plan policy documents, and the annual budget.

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