Level Funded Health Plans

level funded health plan

What is a Level-Funded Health Plan?

A level-funded health plan is a type of self-funded health insurance where employers pay a fixed monthly amount to cover three core components:

  • Claims costs (medical expenses submitted by employees).
  • Stop-loss insurance (protection against unexpected high claims).
  • Administrative fees (third-party services for plan management).

This model blends the cost predictability of traditional insurance with the flexibility of self-funded plans, making it ideal for small- to mid-sized businesses seeking affordable health benefits without sacrificing quality.

How Do Level-Funded Plans Work?

Level funding blends the predictability of a fully insured plan with the cost advantages of self-funding. The employer makes consistent monthly payments, which are allocated into three main components:

✔️ A portion of the payment is set aside to cover employees’ medical claims.

✔️ This acts as a safeguard, protecting employers from excessive claim costs beyond a certain threshold.

✔️ Covers expenses related to claims processing, customer service, and plan management handled by a third-party administrator (TPA).

If claims are lower than anticipated, businesses may be eligible for a refund at the end of the year, providing additional cost savings.

Level-Funded vs. Fully Insured Plans: Key Differences

Understanding the distinction between fully insured plans and level-funded plans is critical for cost-conscious employers:

Fully Insured Plans Level-Funded Plans
Premiums paid to insurer Fixed monthly payments split into claims, stop-loss, and administrative costs
No refunds for low claims Potential refunds if claims are lower than projected
Limited cost control Transparent pricing and customizable options (e.g., PPO plans, telemedicine)
ACA-mandated fees apply Exempt from some ACA requirements but still meet minimum essential coverage standards

Why Level Funding Wins for Cost Savings

  • Predictable monthly payments simplify budgeting.
  • Stop-loss insurance caps financial risk.
  • Refund opportunities reward low-claim years.

Who Should Consider a Level-Funded Plan?

This model is ideal for businesses that:
✔️ Want to reduce healthcare costs without cutting benefits.
✔️ Seek transparency in where their dollars go.
✔️ Desire flexibility to customize plans (e.g., reference-based pricing, wellness programs).
✔️ Are startups or SMEs struggling with high premiums of traditional insurance.

Key Components of a Level-Funded Plan

Determining Full-Time Equivalent Employees (FTEs)

  1. Claims Account: Monthly funds allocated to employee medical expenses.
  2. Stop-Loss Insurance: Protects against catastrophic claims (specific + aggregate coverage).
  3. Administrative Services: Third-party experts handle claims processing, compliance, and customer service.

Added Cost-Saving Features

  • Telemedicine: Low-cost virtual visits reduce urgent care expenses.
  • Wellness Programs: Promote employee health to lower long-term claims.
  • Network Options: Choose PPO plans or narrow networks for further savings.

Why Employees Love These Plans

Health benefits are a top factor in talent retention:

  • 88% of employees prioritize quality health coverage (Source: Industry Survey).
  • 56% say health insurance impacts their decision to stay at a job.
  • Millennials, who dominate the workforce, value plans that minimize out-of-pocket costs.

Regulatory Considerations & Compliance

One major advantage of level-funded plans is that they are not subject to certain Affordable Care Act (ACA) regulations that apply to fully insured plans. However, employers offering level-funded plans through providers like Taylor Benefits ensure that plans meet minimum essential coverage standards and provide preventive services at 100% coverage when using in-network providers.

Overcoming Barriers to Adoption

Despite 98% of brokers endorsing level-funded plans as a long-term solution (WellNet Survey), many employers hesitate due to:

  • Lack of awareness about self-funded options.
  • Reluctance to switch from familiar fully insured plans.
  • Misunderstanding over potential savings.

How Taylor Benefits Can Help

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Our Self-Funded Program offers:
✅ Tailored plan designs for SMEs.
✅ ACA-compliant coverage with 100% preventive care (in-network).
✅ Proven cost-control strategies and transparent reporting.

Take Control of Your Healthcare Costs Today

Historically, level-funded plans were only available to large employers, but today, small- and mid-sized businesses can also take advantage of this cost-effective approach to employee health benefits. By considering a level-funded health plan, businesses can achieve greater control, transparency, and savings, ensuring they offer employees high-quality healthcare without overspending.

Don’t overpay for traditional insurance. Explore how level-funded health plans from Taylor Benefits can deliver affordable, high-quality coverage while putting you in the driver’s seat.

Ready to Switch? Contact our expert benefits advisor to design a plan that fits your budget and workforce needs.

Written by Todd Taylor

Todd Taylor

Todd Taylor oversees most of the marketing and client administration for the agency with help of an incredible team. Todd is a seasoned benefits insurance broker with over 35 years of industry experience. As the Founder and CEO of Taylor Benefits Insurance Agency, Inc., he provides strategic consultations and high-quality support to ensure his clients’ competitive position in the market.

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