Level-Funded Health Plan
A hybrid funding model where the employer pays a fixed monthly amount that covers expected claims, admin fees, and stop-loss insurance — with a potential refund if claims come in lower than projected.
Level-funding sits between fully insured and fully self-funded plans. The employer pays a level, predictable monthly amount — similar to a traditional premium — but that amount is actually broken into three pieces: projected claims costs, administrative fees, and a stop-loss insurance premium that caps the employer’s worst-case exposure.
The appeal: if actual claims come in under the projected amount for the year, the employer can receive some or all of the surplus back. If claims run over, stop-loss coverage protects the employer from catastrophic exposure — so the monthly cost stays level either way.
Who it suits: typically employers in the 10–500 employee range who want more cost transparency and potential savings than a fully insured plan offers, but aren’t ready to take on the full risk (and reporting complexity) of a self-funded plan.
The tradeoff: level-funded plans usually require a health questionnaire or some underwriting at renewal, and the “refund” isn’t guaranteed — it depends on your group’s actual claims experience for the year.
Related Terms
Have questions about how this applies to your renewal?
Talk to a group health insurance broker who specializes in your situation.