Jan 22, 2024
For many years, large employers have enjoyed the advantages of self-funded health plans while self-funding was not an option for the small-to-midsize employer. However, many carriers recently began making self-funded options available to these smaller groups. As a result, the percentage of small employers offering a level funded health plan has grown from 6% in 2018 to 35% in 2023.* These small group self-funded plans, often referred to as level funded, are packaged and invoiced very similarly to fully insured health plans.
As health insurance premiums rise, employers are looking for unique alternatives to the fully insured market. Due to the greater availability and competitive pricing of these level funded plans, more small employers have begun offering level funded health plans.
While level funded plans offer similarities to the fully insured options, there are several key differences employers should be aware of to make sure their health plan remains compliant.
PCORI Fees
- Fully insured carriers pay these fees directly on behalf of the employer.
- Some level-funded plans will pay these fees as well, but employers will need to know if they need to pay the fees directly to PCORI.
- If an employer is required to pay the fees directly, the carrier will usually provide the necessary information to make the appropriate payment.
1095B/1095C Forms
- An employer may need to provide a report to a payroll/accounting/compliance firm to generate these 1095 forms as their level funded carrier may not distribute the 1095 form to the employees.
- Employers should ask the level funded carrier how the 1095 forms will be handled so they can remain in compliance with IRS regulations.
COBRA Administration
- If an employer has less than 20 employees, Federal COBRA does not apply, and state continuation is not available to terminated employees.
- Employers with level funded plans must also make sure they are using correct COBRA rates.
- COBRA premium must be based on actual cost of providing coverage in the prior plan year or expected cost of providing coverage in the current year.
Claims Surplus Refunds
- Employers must be mindful regarding employee contribution toward a level funded health plan, as some of the year-end refunds are plan assets under ERISA.
- ERISA also requires that plan assets must be used exclusively for the benefit of plan participants and can be distributed in several ways.
- Year-end refunds can be given to plan participants as a cash refund, premium holiday or paying for enhanced benefits.
- It is acceptable to distribute the refund in equal amounts regardless of the employee contribution amount paid toward the plan.
HIPAA Privacy
Since level funded plans are self-insured under applicable laws, this means they must comply with all HIPAA Privacy and Security rules.
There are certain obligations that must be completed, including:
- Appointing a HIPAA Privacy Officer
- Distributing a Notice of Privacy Practices
- Completing a security risk assessment to determine what electronic PHI the plan has access to
- Developing appropriate policies and procedures to protect that PHI
Nondiscrimination Testing
- Self-insured plans, including level-funded plans, are subject to Section 105(h) non-discrimination testing rules:
Non-Discrimination Testing Rules
Transparency in Coverage Drug Reporting – RxDC Reporting
- The sponsors of level-funded plans are responsible for ensuring their plans complete the prescription drug reporting required by the transparency in coverage provisions of the ACA and CAA 2021.
- Annual reports are due the first of June for the preceding calendar year.
- Employers should ask their carrier/TPA how they should handle reporting and filing of these reports, including whether an earlier carrier deadline applies
Prescription Drug Data Collection (RxDC) Resources
Gag Clause Attestation
- Employers offering level funded health plans are required to submit an attestation of compliance with the gag clause prohibitions contained in The Consolidated Appropriations Act (CAA).
- Employers will be able to rely on their carrier or TPA to submit the required attestation.
Who Must Complete the 'Gag Clause Attestation'?
Employers will need to comply with the requirements of a level funded plan, so having a knowledgeable insurance partner is key to successfully navigating these matters.
How Amwins Can Help
- Our sales representatives have extensive knowledge of the level funded market
- We offer multiple Quote to Enroll platforms to aide with every step of the sales process
- We are now contracted with most National and Regional Carriers
Contact your local Amwins Connect Sales Representative for more information!
