Level-Funded Group Health Insurance Plans

A Flexible Health Insurance Option That Balances Cost and Coverage

Level-funded plans blend the stability of fixed monthly payments (like fully-insured plans) with self-funded potential savings. Employers pay a flat monthly amount that covers:

• Administrative Costs – Third-party administration (TPA), network access, support

• Claims Funding – Set aside for employee healthcare claims



• Stop-Loss Insurance – Coverage for catastrophic claims exceeding the funded amount

If actual claims are lower than expected, employers may receive a year-end refund; if claims exceed the threshold, stop-loss coverage limits liability.

Benefits of Level-Funded Group Health Insurance Plans

Avoid State Premium Taxes – Governed by ERISA under federal law.

Claims Transparency – Employers receive anonymized data to spot and address cost drivers.

Cost Predictability – Fixed monthly payments simplify budgeting.

Customizable Coverage – Tailor benefits to meet workforce needs.

Lower Premiums – Often less expensive than fully-insured plans, especially for healthier employee groups.

Refund Potential – Opportunity to recoup unused funds.

What to Consider When Choosing a Level-Funded Group Health Insurance Plan

Increased Administrative Complexity – Requires more oversight, often managed via a TPA.

Shared Financial Risk – Employers are responsible for claims up to the funded amount.

Potentially Limited Refunds – Surplus return depends on plan terms and may not be fully refunded.

Regulatory Obligations – Must comply with ERISA and related federal filings; expert guidance may be needed.

Not Ideal for High-Utilization Groups – Employers with frequent or high claims might not benefit financially.