Level-funded health plans have become one of the most talked-about options in the small group market — and for good reason. They offer a middle ground between the predictability of fully-insured plans and the cost-control potential of self-funded arrangements.
In a level-funded plan, the employer pays a fixed monthly amount — similar to a traditional premium — that covers expected claims, stop-loss insurance, and administrative fees. At the end of the plan year, if actual claims come in below projections, the employer receives a refund of the surplus. If claims exceed projections, the stop-loss coverage kicks in.
This structure gives small employers several advantages. First, it provides cost transparency — you can see exactly how your healthcare dollars are being spent. Second, it creates the potential for year-end savings that simply don't exist in fully-insured plans. Third, it gives employers access to their own claims data, which can inform smarter plan design decisions over time.
Level-funded plans are generally available to employers with as few as 10 employees, though the sweet spot tends to be groups of 25 to 150. Below that threshold, the statistical risk can make stop-loss coverage expensive. Above it, a fully self-funded arrangement may offer even greater flexibility.
The key to success with a level-funded plan is working with an experienced advisor who can help you evaluate your claims history, select the right stop-loss parameters, and choose a third-party administrator with a strong track record. Done right, level-funding can deliver meaningful savings while maintaining the coverage quality your employees expect.
If you're currently on a fully-insured plan and haven't explored level-funding, it's worth a conversation. The potential savings — and the transparency — can be significant.
