Medical Gap Strategies
Employer Benefits of Medical Gap Coverage with High-Deductible Health Plans (HDHPs)
Lower Overall Health Insurance Costs
• Increase major medical deductibles reduces premium rates
• Add Medical Gap coverage to fill deductibles and co-pays at a lower cost than traditional low-deductible plans
• Overall reduction in premium
Slows Annual Medical Premium Increases
• Annual medical premium increases primarily affect major medical plans, not Medical Gap insurance
• Gap insurance premiums remain relatively stable, providing cost predictability
Enhanced Employee Retention and Satisfaction
• Strategy has a perceived value of benefits to employees
• Lower premium contributions and out-of-pocket expenses improve employee financial wellness
ICHRA (Individual Coverage Health Reimbursement Account
What is ICHRA?
• Tax-free reimbursement for employees to buy individual health plans on the ACA Marketplace
• Available to businesses of any size, no contribution limits
• Customizable allowances by employee class (e.g., full-time, part-time)
Lower Costs, Higher Value
• Tax-free reimbursements maximize employee benefit value
• Simplifies administration vs. managing group plans
• Supports recruitment/retention with modern, flexible benefits
Employee Freedom
• Choose Marketplace plans tailored to individual or family needs
• Access diverse options (e.g., bronze, silver, gold plans)
• Flexibility to select preferred providers and coverage levels
Cost Savings for Employers
• Set fixed reimbursement budgets (e.g., $300-$500/month per employee)
• Avoid high group plan costs ($7,584 single/$19,276 family annually, 2024 data)
• No minimum contribution requirements, unlike group plans (50%+ premium)
Source: 2024 health insurance cost data; ACA regulations
Level Funding
What is Level Funding Health Insurance?
Level-funded health insurance is a hybrid employer-sponsored plan blending fully insured and self-insured models. Employers pay a fixed monthly amount covering administrative fees, expected claims, and stop-loss insurance to cap risk. If claims are lower than projected, employers may receive refunds; if higher, stop-loss covers excesses. It's ideal for small to mid-sized businesses transitioning from fully insured plans.
Advantages
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Potential Cost Savings: Fixed payments can be lower than fully insured premiums; surplus refunds if claims are below expectations, reducing overall expenses.
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Predictable Budgeting: Steady monthly costs provide financial stability, avoiding fluctuations from high claims due to stop-loss protection.
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Medical Underwriting Benefits: Rates based on group's health history (experience rating) rather than community rates, potentially lowering costs for healthier groups.
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Customization and Control: More flexibility in plan design and access to claims data for better cost management.
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Tax and Fee Exemptions: Often avoids certain state taxes and fees associated with fully insured plans.
Disadvantages
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Potential Cost Increases: High claims can lead to rate hikes in renewal years, eroding savings.
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Medical Underwriting Risks: Requires group health assessment; unhealthy groups may face higher rates, denial, or ineligibility.
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Administrative Complexity: More paperwork and oversight than fully insured plans, including compliance with self-funded regulations.
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Limited Suitability: Best for stable, healthier groups; not ideal for very small or high-risk employers.
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Refund Uncertainty: Surplus returns depend on low claims; no guarantee of savings every year.