Level-Funded Health Plan

Definition

A level-funded health plan is a self-funded arrangement structured to feel like a fully insured plan. The employer pays a fixed monthly amount — typically divided among claims funding, stop-loss premium, and administrative fees — but the underlying mechanism is self-insurance. At year-end, if actual claims were lower than the projected claims fund, the employer receives a refund of the unused portion. The plan includes stop-loss coverage to cap exposure from any single catastrophic claim.

What This Means for Employers

Level-funded plans are one of the most accessible entry points for smaller employers who want the cost advantages and data transparency of self-funding without accepting unpredictable monthly cash outflows. The refund provision is a meaningful benefit: in a fully insured plan, a healthy year produces nothing for the employer. In a level-funded arrangement, it produces a check. Access to claims data — even limited aggregate reporting — allows you to begin making data-informed decisions at renewal rather than simply accepting whatever the carrier proposes.

Related Terms

• Self-Funded Health Plan
• Fully Insured Health Plan
• Stop-Loss Insurance
• Captive Insurance