Level Funding Is Self-funding: 5 Avoidable Contract Risks, With Frank Pennachio
Summary
Host Stacey and guest Frank Panaccio discuss level-funded plans, clarifying that they are a form of self-insurance rather than fully insured coverage. They outline five critical risks, including embedded ERISA violations, stop-loss misalignment, restrictive surplus formulas, limited claims data access, and imprudent fees. The episode emphasizes that plan sponsors assume significant fiduciary liability and personal asset exposure when adopting these models. Panaccio advises employers to engage ERISA attorneys, never sign contracts as-is, and conduct thorough RFPs to make intentional, informe…
Topics discussed
Introduction: The crisis of rising health insurance costs
Defining self-funding and the need for intentional trade-offs
Guest introduction: Frank Panaccio and 'The Silent Danger'
What is level funding? A hybrid that is actually self-funded
Why now? The explosion of level funding due to cost desperation
The goal: Making intentional and intelligent fiduciary decisions
Risk 1: ERISA violations and personal asset exposure in contracts
Risk 2: Misalignment between plan promises and stop-loss coverage
Context: Stop-loss misalignment and related resources
Risk 3: Surplus fund traps, service fees, and invoice credits
Weighing the risk-reward ratio of level-funded plans
Risk 4: Loss of claims data transparency and ownership
Risk 5: Prudent fees and indefensible vendor costs
Action items: Engage ERISA attorneys and educate the team
Shopping around: Comparing vendors and conducting proper RFPs
Choosing aligned brokers and EBCs with transparent practices
Summary of four key takeaways for plan sponsors
Final advice: Managing risk vs. cost reduction and resources
Closing remarks and guest contact information
Sponsor message from Dr. Stan Schwartz
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