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The Author’s Perspective on Health Coverage for Small Employers

Disclaimer: The viewpoints presented in this article solely represent the author’s opinions and do not necessarily align with the views of Carolina Journal or its publisher.

Challenges Faced by Small Employers in the Healthcare Arena

In our increasingly competitive business landscape, small employers are confronted with a myriad of obstacles, particularly when it comes to offering affordable and high-quality health insurance that meets the diverse needs of their workforce. These challenges can hinder the growth and sustainability of small businesses, as employees today expect comprehensive health benefits as part of their employment package.

The Benefits of Level-Funded Plans

For many small employers, level-funded plan coverage stands out as one of the most favorable options available. Historically, smaller businesses had to choose between the higher fixed costs associated with fully insured plans and the potential for cost savings, albeit accompanied by certain risks, that comes with self-funding. Level-funded plans present a compelling third option that often better aligns with the unique requirements of small employers.

These innovative plans mesh the stability of fixed monthly payments—similar to fully insured plans—with the cost-saving advantages and data transparency typically associated with self-funded programs. This unique combination allows small employers to balance financial certainty with the possibility for wellness enhancement and cost-efficiency, thus paving the way for healthier workplaces.

Bridging Gaps in the Market

Level-funded plans serve to fill a crucial gap in the small business health-insurance market. They empower many small-business owners to dedicate their energies to growth and innovation while still providing high-quality benefits to their employees. This approach not only improves employee satisfaction but also enhances employee retention, which is often a concern for smaller firms that may struggle to compete with larger corporations.

Legislative Developments in North Carolina

Despite the merits of level-funded plans, not all small employers in North Carolina have access to these valuable options. In 2023, the state made significant strides by adjusting the law, allowing small employers with 12 or more eligible employees—down from 20—to access level-funded plans. However, there is still a pressing need for further legislative updates that enable small businesses in North Carolina to enjoy the flexibility, choice, and affordability they rightfully deserve.

House Bill 156 and Senate Bill 218 are currently under consideration in the North Carolina legislature. These bills aim to expand access to level-funded plans even further, down to businesses with just five eligible employees. However, to provide even greater support, it would be beneficial for the State of North Carolina to consider lowering the eligibility threshold down to as few as two employees. This move will foster a more inclusive environment for small businesses to thrive.

Comparing North Carolina to Other States

When placed in the larger context, North Carolina lags behind many other states regarding access to level-funded plans. Forty-four states allow level-funded plans for employers with two or more employees, including neighboring states like South Carolina, Georgia, Tennessee, and Virginia. This disparity highlights an opportunity for North Carolina to better support its small businesses.

Recent data indicate a rising trend in the adoption of level-funded plans. A recent survey revealed that about 42% of small firms have made the switch to these plans. Furthermore, it’s estimated that over two million Americans are currently covered by small businesses leveraging the safety, security, and cost-savings offered by level-funded plans.

Predictability in Costs

One of the most significant advantages of level-funded plans is the predictability they offer in terms of costs. Small employers benefit from fixed monthly payments that contribute to self-funding health benefits while also purchasing stop-loss coverage. This stop-loss insurance shields employers from catastrophic claims, ensuring that they do not face unexpected financial burdens. With fixed monthly and annual coverage costs, level-funded plans enable employers to budget more effectively.

Employers that opt for level-funded plans often find that they can save on premiums while also enhancing employee benefits compared to fully insured plans under the Affordable Care Act (ACA). This affordability and predictability empower small businesses to provide better health coverage, facilitating a healthier workforce.

Unlocking Potential Savings

In addition to providing cost predictability, level-funded plans present substantial opportunities for savings. On average, level-funded health plans for small employers are approximately 18% less expensive compared to ACA fully insured offerings.

An attractive aspect of level-funded plans is the surplus share feature. Should the healthcare costs for medical and pharmacy claims come in lower than anticipated, the plan sponsor may receive a surplus refund at the end of the plan year (where legally permissible). Conversely, if health costs exceed expectations, stop-loss coverage is there to protect the plan sponsor. This surplus-sharing mechanism incentivizes businesses to nurture healthy behaviors among employees, ultimately driving down overall healthcare costs. For instance, recent internal data from UnitedHealthcare revealed that 46% of last year’s level-funded customers received an average surplus refund of $9,500—significant savings for small enterprises.

Level-funded plans operate under federal regulations such as the Employee Retirement Income Security Act (ERISA), which establishes a consistent regulatory framework across states. These plans are designed with various safeguards to ensure solvency and comprehensive coverage, allowing small employers to navigate the healthcare landscape with greater ease. Additionally, level-funded plans typically escape the certain taxes imposed on fully insured plans, resulting in lower costs.

The Importance of Transparency

Accessibility to detailed claims data is another hallmark advantage of level-funded plans. Employers participating in these plans gain valuable insights into their health expenditures, including covered medical and prescription drug claims, as well as health trends across their workforce. This information allows for the implementation of targeted wellness programs and health interventions that can significantly enhance employee well-being.

Proactive measures, combined with the transparent reporting provided by third-party payors, can result in healthier employee behaviors and lowered healthcare expenditures in the long run. Unfortunately, small employers relying on traditional ACA fully insured plans often do not have access to such detailed reporting and analytics.

Conclusion: The Path Forward for North Carolina’s Small Employers

In summary, level-funded plans often represent the optimal solution for small employers due to their blend of predictable costs, potential for considerable savings, and access to valuable health data. As small businesses navigate the complexities inherent in providing health insurance, level-funded plans offer a practical approach that not only delivers a broad network of healthcare services but also provides savings for employees.

This modern strategy to health coverage serves as a win-win situation for both employers and employees alike, making it an ideal choice for many small businesses in North Carolina.

Now, more than ever, we must unite in our efforts to advocate for expanded access to quality healthcare benefits for the wider populace in North Carolina.

How AI legalese decoder Can Enhance Understanding

Given the complexities surrounding health insurance regulations and the nuances of level-funded plans, the AI legalese decoder can serve as a powerful tool for small employers and business owners. By simplifying legal jargon and breaking down complex regulatory language, the AI legalese decoder allows users to better understand their options, ensuring that they make informed choices about health coverage. This capability not only aids in navigating the legislative landscape but also empowers small businesses to advocate for their rights and benefits with confidence.

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