Fixed monthly cost like normal group insurance, plus a shot at getting money back after a healthy year. Here's how level funding works, and which teams it actually rewards.
A level-funded plan charges the business one fixed monthly amount, split behind the scenes into administration, stop-loss insurance (which caps your claims exposure), and a claims fund sized to your group. Employees get a normal health plan with a network and an ID card.
The payoff: when your group's claims run below expectations, part of the unused claims fund can be returned to the business. The catch: the plan is underwritten to your group's health, so it rewards younger, healthier teams, and the renewal moves with your actual claims. Healthy census, real discount. Rough year, tough renewal.
Pays the carrier or administrator to run the plan: claims processing, member service, and access to the provider network your employees use. Works exactly like the admin layer inside any group plan.
The safety rails. If one member has a catastrophic claim, or the whole group's claims exceed the expected maximum, stop-loss pays the overage. Your in-year exposure never exceeds the level payment you budgeted.
The pool that pays your group's actual medical claims, sized by underwriting to your team's expected usage. This is where the refund lives: claims below expectations leave a surplus, and depending on the arrangement, a meaningful share of it returns to you or credits the next year.
Level funding is a bet that your group is healthier than average. Unlike the community-rated fully-insured small group market, a level-funded plan underwrites your team, usually via short health questionnaires, and prices to your expected claims. Win the bet and your cost runs below the fully-insured equivalent with refund potential on top. Lose it, and the renewal after a heavy claims year can move sharply, at which point the guaranteed-issue fully-insured market remains open to every group of 1 to 50.
That's why we never recommend level funding from a brochure. We model it against fully-insured, and where it fits, an ICHRA, on your actual census, and we tell you plainly when the community-rated market is the better protection.
State specifics matter too: carrier lineups and market rules differ by state. Start from our state pages for your local picture, or the small business hub for the full menu of group structures.
A group health plan where the employer pays one fixed monthly amount built from three parts: plan administration, stop-loss insurance that caps your claims exposure, and a fund that pays your group's actual claims. Employees experience a completely normal health plan. The difference shows at year end: if claims ran low, part of the unused claims fund can come back to the business.
Fully-insured: you pay a premium, the carrier keeps whatever claims don't use. Level-funded: your payment is sized to your own group's expected claims, and a healthy year can produce a refund. The price of that upside is underwriting: your group's health is evaluated up front, and renewals move with your actual claims experience.
That's what stop-loss insurance inside the plan is for: it pays claims beyond the expected maximum, so your worst case during the year is capped at the level payment you already budgeted. The real exposure is the renewal after a heavy year, which can rise sharply, at which point returning to the guaranteed-issue fully-insured market is always an option for groups of 1 to 50.
Day to day, no: ID card, network, deductible, claims paid. The differences live on the employer side, health questionnaires at setup, refund potential, and more renewal variability.
Groups of roughly five or more with a younger or demonstrably healthy census, stable rosters, and an owner comfortable trading some year-to-year variability for a lower expected cost and refund potential. Groups with significant ongoing conditions are usually better protected in the community-rated fully-insured market, and we say so when that's the case.
A simple census, ages and ZIP codes, no health details up front, is enough for us to model level-funded against fully-insured and ICHRA structures and show you the realistic range, at zero cost to you.
Quotes are non-binding and based on the information you provide.