💡 What Is Level-Funding? And Is It the Right Fit for Your Company? 🤔
When small and mid-sized businesses 👥 look for ways to save on health insurance 🏥 without sacrificing quality, one option that often comes up is level-funding. But what exactly is it? And is it a good fit for your company?
Let’s break it down. 🔍
🤓 What Is Level-Funding?
Level-funding is a type of health insurance arrangement that blends the stability of traditional, fully insured plans with the cost-saving potential of self-funding. ⚖️
In simple terms, it allows employers to pay a predictable monthly amount 💸 for employee benefits—hence the word “level”—while still having the chance to save money 💰 if claims are lower than expected.
A level-funded health plan usually includes three key components:
🧾 Fixed Monthly Payment
Employers pay the same amount each month, which covers:
⚙️ Administrative Costs (to the insurer or third-party administrator)
🛡️ Stop-Loss Insurance (protects your business from high claims)
💵 Claims Fund (used to pay employee medical claims)
🔄 Claims Fund Reconciliation
At the end of the year 📆, if your team used less than what was funded for claims, you may receive a refund 💸 of the unused amount. If claims are higher, stop-loss insurance kicks in to protect you from big surprises.
🔍 Plan Customization & Transparency
Unlike traditional fully insured plans, level-funding gives you real insight 📊 into where your dollars are going—helping you make smarter decisions over time. 💡
💬 "Level-funding gives small businesses big-business tools—with more control, less risk, and real opportunities to save."
🏢 Why Is Level-Funding a Good Mechanism for SMBs?
Traditionally, self-funded plans were only available to large companies. 🏢 But with level-funding, small and mid-sized businesses can now tap into this model without the full risk.
Here’s why that’s great news 🎉:
📆 Cost Predictability – Know exactly what you're paying each month—no surprises.
💰 Potential Savings – Healthy team? You could get part of your money back.
🎛️ More Control – Customize your plan and monitor usage trends.
📉 Avoid Certain ACA Fees – Level-funded plans are often exempt from specific taxes tied to fully insured plans.
🤷♂️ Is Level-Funding the Right Fit for My Company?
It depends. Every company is different—but here’s a quick look at the pros and cons:
✅ Pros:
📅 Predictable monthly costs
💸 Potential refunds on unused claims funds
💼 Lower total costs for healthy employee groups
📈 Greater insight into your claims data
🚫 Often exempt from some ACA fees
⚠️ Cons:
🚨 Not ideal for groups with high or unpredictable claims
📝 Requires some underwriting (your group’s health history matters)
🧩 Might not be as plug-and-play as traditional plans
❌ Refunds aren’t guaranteed—some years, claims may exceed funding
⚖️ “Level-funding isn’t a magic bullet—but for the right company, it’s a smart, strategic shift.”
🧠 Final Thoughts
Level-funding can be a powerful strategy for SMBs looking to regain control over healthcare spending—without assuming full risk. It’s especially worth considering if you have a relatively healthy workforce and want more transparency and flexibility in your benefits offering.
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