Level-funded health insurance is exactly what it sounds like, an employer pays the same amount of premium each month, hence the term ‘level’. In the simplest of terms, the total monthly premium is divided into three buckets. The first bucket, the CLAIMS fund, is an amount set aside to cover expected claims expense for the group. The second bucket is stop-loss PREMIUM used to cover the cost of the insurance obtained to protect the group in the case of an unusually high claim and/or the amount in the first bucket is exceeded. The third bucket covers the ADMINISTRATION of the Plan provided by a third-party administrator (TPA). 

For example, if a group’s monthly total premium is $400, it would hypothetically be divided into the three buckets as follows:

1.    $200 to the claims fund

2.    $100 to the stop-loss insurance provider

3.    $100 for administration

Remember, this all happens behind the scenes. The group simply pays one total premium amount each month to the TPA.

In upcoming blog posts we’ll go into detail regarding the function of each of these buckets.

If you have any questions, please don’t hesitate to contact us anytime at support@carepathbenefits.com or at 1-888-750-0953.