Zenefits on Tuesday announced it is launching a level payment self-funded health plan in cooperation with Aetna for groups of two-to-50 lives. The insurance broker estimates premium savings on these plans may be up to 30% lower than what some small businesses may be paying currently.
A level payment health plan is a way for small groups to be self-funded, but only works if the organization can prove its employee base is healthy, explains Joe Slater, partner and consulting actuary at Murrieta, Calif.-based consultancy Axene Health Partners LLC, who is not affiliated with Zenefits.
Under a level-funded plan, employers pay a “level,” or set, amount each month to their TPAs.
As with self-insured plans, reinsurance kicks in if claims go over the set amount while any unused insurance dollars are refunded to the employer at the end of the year. However, since level-funded plans are similar to self-funded plans, the ACA’s laws regulating fully insured plans are not applicable – meaning the employer is free from Obamacare mandates on what benefits needs to be in an insurance package. Therefore, a group can receive a rate more in line with their risk, Slater says. As a result, level-funded plans are only intended for low-risk groups.
The Zenefits product is launching in 28 states. The company will require most interested clients or prospects to ensure their group is low risk and healthy, says Caspar Yen, Zenefits’ senior director of product management in San Francisco. Zenefits process streamlines the collection of information that is then passed along to Aetna, who reviews the health and eligibility of the group.
In Arizona, Connecticut, Colorado, Delaware, Florida, Iowa, Illinois, Kansas, Massachusetts, Maryland, Maine, Missouri, North Carolina, New Jersey, Nevada, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin, West Virginia and Wyoming, groups with fewer than 15 subscribers will be required to fill out a questionnaire on the health of their employees. In Georgia and Nebraska, the questionnaire is required by groups with fewer than 10 subscribers.
Zenefits does not intend to offer the plan in other states at this time. Level-funded plans are not allowed in California or New York, due to state regulations.
Self-funding is not often thought of in the small-group market, says Axene’s Slater, since most health benefit sales forces haven’t been geared to sell it.
However, Brian Corbey, VP of small group at Aetna, says such a product is needed. “The small business market needed a new solution — one that would contain costs, without introducing unnecessary risk and complexity.”
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