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!