Level-funding health insurance helps businesses manage healthcare costs while keeping monthly payments predictable. It combines the reliability of traditional insurance with the flexibility of self-funding. Employers make fixed payments covering claims, administrative costs, and stop-loss protection. If claims are lower than expected, businesses may receive a refund at the end of the plan year, offering a cost-effective way to provide employee health benefits while maintaining financial control.

• Year-End Reallocation

  At the end of the plan year, if the total employee medical claims are less than the amount set aside, the employer may receive a refund for the surplus. This reallocation of unused funds is one of the key advantages of level funding, as businesses can benefit from managing claims efficiently. Conversely, if claims exceed expectations, stop-loss insurance will cover the excess.

• Fixed Monthly Payments

  With level funding, businesses make fixed monthly payments that include:

  • Claims Funding: Money allocated for employee medical claims.
  • Administrative Costs: Fees for managing and processing the health plan.
  • Stop-Loss Insurance: Protection against high, unexpected claims.

  This predictability in payments allows businesses to budget with certainty, without the unpredictability of fluctuating claims month to month.

• Self-Funded Element

  Level funding means that the employer pays for actual medical claims, up to a set limit. This is in contrast to fully insured plans where the insurance company bears the full cost of claims. If claims are lower than expected, the employer may benefit from the leftover funds (as mentioned in the year-end reallocation).

• Stop-Loss Insurance Protection

  To safeguard against high-cost claims, stop-loss insurance is included in the plan. This ensures that if claims exceed a certain threshold, the insurance will cover the additional expenses, protecting the employer from financial strain.

• Transparency and Control

  One of the major advantages of level funding is the access to detailed claims data. Employers can see where their healthcare dollars are going and make informed decisions about plan adjustments and employee healthcare needs.

• Ideal for Small to Mid-Sized Businesses

  Level funding was traditionally only an option for larger companies, but it’s increasingly popular with small and mid-sized businesses seeking to balance cost efficiency and flexibility.