Level Funded Plans

Middle ground between traditional/fully insured and self-funded health plans.

What Is Level-Funded Health Insurance, and How Does It Work?

For businesses with 2-300 employees, health insurance options typically include fully insured, level-funded, and self-funded plans. One of the fastest-growing trends is level-funded health insurance, offering a balance between cost predictability and plan flexibility.

How Level-Funded Health Insurance Works

Level-funded plans combine features of both fully insured and self-funded plans. Employers pay a fixed monthly amount that covers:

  • Expected employee health costs
  • A claims fund to pay for actual claims
  • Stop-loss insurance to protect against high-cost claims

If employee claims are lower than expected, the employer may receive a refund at the end of the year. If claims exceed the estimate, stop-loss insurance covers the excess, protecting the business from unexpected medical expenses.

Key Benefits of Level-Funded Plans

  • Predictable Costs – Fixed monthly payments provide budgeting stability.
  • Potential Refunds – Employers may receive money back if claims are lower than expected.
  • Tax Advantages – These plans are considered self-funded under federal law, meaning they may be exempt from certain state insurance mandates, leading to potential cost savings.

Who Should Consider a Level-Funded Plan?

Level-funded health plans are ideal for small to mid-sized businesses seeking cost control and flexibility. They are particularly beneficial for companies with healthier workforces, such as those in:

  • Technology
  • Professional Services
  • Small Manufacturing

Businesses in these industries often experience lower healthcare claims, increasing the potential for savings and refunds.

Want to explore whether a level-funded plan is right for your business? Contact us today to learn more!