Why level funding might be your best new prospecting tool for small businesses

Successful brokers know the importance of keeping their pipeline full, especially during challenging times. So, you’ve built good prospecting habits like setting goals, establishing routines and scheduling time to connect with potential clients.

But there’s another critical pipeline management strategy that you may be overlooking: Having the right mix of health benefit plan designs for your small- to mid-sized clients.

One emerging insurance option — level funding — gives prospects more control over costs than traditional fully insured plans. And, it’s catching on. According to the 2020 Health Benefits Survey, level funding for small employers increased nearly 29% from 2019 to 2020.

Adding level funding to your portfolio might be your newest strategy for prospecting and retaining clients when paired with a carrier/third-party administrator (TPA) that supports you and your clients.

What’s behind the growth in level-funded plans?

According to the 2020 Employer Health Benefits Survey, 31 percent of employees from small firms are in a plan that is either self-funded or level-funded. Here are some potential reasons why smaller employers are moving to this plan category:   

Cost

A self-funded health benefit plan can be less expensive than a fully insured plan. With costs increasing the way they have over the last five years, this is a crucial consideration for smaller employers. 

Flexibility

Employers can create a tailored self-funded health benefit plan design with level funding to meet their unique needs. 

Predictability

Offering level funding in connection with a self-funded health benefit plan design helps make things more predictable for clients because it provides level monthly payments, regardless of claim activity. Employers fund their maximum liability through 12 equal monthly payments based on consistent enrollment, which enhances the employer’s ability to budget. 

Protection

A stop-loss insurance premium included in the level-funded monthly payments helps protect against the financial impact of many covered claims, an individual covered catastrophic claim, or both. 

Refund potential

Groups fund for their expected claims each month, leaving the potential for a refund at (or after) the end of the contract period if the group’s claims are lower than predicted and funded during the plan year.

Why level funding is a tremendous new business weapon

Family coverage premiums are up 22% based on findings from the 2020 KFF Health Benefits Survey. And according to another 2020 Kaiser study, the average annual family premium for covered workers in small firms is $20,438.

That’s why sticking only with fully insured plans means you may be missing out on an opportunity to save your prospects and clients money. But that’s not all. You may not be able to attract prospects who are open to (or specifically looking for) something different. Plus, you may lose potential or current clients to competing brokers who are offering level-funded options.

To provide your clients with more savings, richer benefits, and quality providers, it’s essential to have level funding as part of your mix.

Tips for choosing a carrier or third-party administrator

Once you make level funding a part of your prospecting process, you’ll need to find a carrier or a third-party administrator (TPA). You’ll want one who makes your life and your client’s life easier. That starts with having a dedicated sales representative – someone who serves as a trusted advisor and asks questions to understand your client’s needs. Beyond that, you also want someone who:

• Thinks outside the box to find every client the best plan design
• Provides creative and affordable solutions and several plan design options
• Guides you during the underwriting and enrollment process so you know what to expect
• Ensures a smooth transition for your client with in-depth knowledge on the carrier/TPA requirements, so there are no surprises

Learn more and start prospecting

There’s a wide variety of plan design options available and cutting through the different competitive products can be challenging for brokers. But, when you discover creative ways to get your clients the coverage they need at a better price, it’s well worth the effort.

Start by setting aside time to learn about carriers/TPAs that offer budget-friendly, creative plan designs that you could present to your small and mid-sized clients. This could include a level-funded solution with predictable payments. Then identify which carrier/TPA will support you and your clients for the long haul. Finally, take this information and determine how it fits your current client base and allows your business to grow as you expand to new clients.

Dale Kumpula, Regional Sales Manager with Trustmark Small Business Benefits^®, has more than 22 years of group health insurance experience.