Level-funded health plans
A level-funded plan is a self-funded plan dressed for a small employer: you pay a fixed monthly amount that covers expected claims, administration and stop-loss insurance, and if claims come in lower than expected, some of the surplus may come back to you.
They have spread fast. The KFF 2026 Employer Health Benefits Survey found 38% of covered workers at smaller firms were in level-funded plans in 2026.
A free matching service for employers, not a broker or insurer. We introduce you to a licensed broker and tell you who they are before anything is shared. No plan, tax or legal advice. How it works
When a level-funded plan can make sense
- Your team is relatively young and healthy, so expected claims are lower.
- You want a fixed monthly cost like a fully insured plan.
- You would like claims reports, which fully insured small groups rarely see.
- You are open to a possible surplus refund at year end.
- You have 10 or more enrolled employees (many programs set a floor).
- You understand the plan may be rated on your group's health at renewal.
Fully insured or level-funded at a glance
| Feature | Level-funded |
|---|---|
| Monthly cost Fully insured: fixed premium | Fixed |
| Who carries the claims risk Fully insured: the carrier | Employer, capped |
| Surplus back if claims are low Fully insured: no | Often, in part |
| Health questions to quote Fully insured small group: none | Usually |
| Covered workers at smaller firms KFF 2026, firms of 10 to 199 workers | 38% |
Plan features vary by program. Share of workers from the KFF 2026 Employer Health Benefits Survey. General information, not insurance advice: a licensed broker can explain a specific program's terms.
Six terms to read in a level-funded proposal
The headline monthly cost matters less than these. Ask the broker to point each one out.
Specific stop-loss point
The claim amount per person above which the stop-loss insurer pays. A lower point means more protection and a higher cost.
Aggregate stop-loss
The total claims cap for the whole group for the year, and whether it is set as a percentage of expected claims.
Surplus refund terms
How much of any surplus comes back, when, whether you must renew to receive it and whether it is paid as cash or a credit.
Run-out and terminal liability
Who pays claims incurred in the plan year but submitted after it ends, especially if you leave the program.
Renewal rating
Whether the next year's rate can rise sharply after a high-cost claim, and any rate caps written into the contract.
Plan documents and compliance
Level-funded plans are self-funded under ERISA. Ask who provides the plan document, summary plan description and nondiscrimination testing.
Wondering whether level funding suits your group? A licensed broker can quote it next to a fully insured plan.
Find a licensed brokerHow a level-funded plan is quoted and set up
Census and health questions
Most programs ask employees to complete a short health questionnaire, or use another underwriting method.
Proposal
A fixed monthly amount split into claims fund, administration and stop-loss, with the refund terms.
Set-up
Plan document, administrator, network and stop-loss contract are put in place before the effective date.
Year end
After the run-out period, claims are reconciled and any surplus is handled under the contract terms.
Questions people ask
Is a level-funded plan the same as self-funded?
Legally it is a form of self-funding: the employer funds the claims and buys stop-loss insurance to cap the risk. The difference is the packaging. Level-funded programs bundle administration, stop-loss and a fixed monthly payment so a small employer can budget as if it were insured.
What happens if our claims are very high?
Stop-loss insurance covers claims above the specific and aggregate limits, so your monthly cost stays the same that year. The risk is at renewal: the program may raise the rate or decline to renew, and you may need to move back to a fully insured plan.
Do level-funded plans need health questions?
Usually, because they are underwritten on the group's expected claims. Fully insured small group plans cannot use health status. Some employers with an employee in treatment find level funding is priced high or declined for that reason.
Can a five-person company get a level-funded plan?
Some programs accept very small groups, but many start at around 10 enrolled employees. A broker will know which programs in your state accept your size.
Do we get the surplus as cash?
It depends on the contract. Some programs pay a share of the surplus as a refund; others give a premium credit, and some require you to renew to receive it. Read the refund clause before signing.
Ask a broker about level-funded plans
Three short steps: where the business is, what you have now, and who to speak to. It takes about two minutes and asks nothing about anyone's health.
- Free for employers. The broker pays us a flat fee per introduction.
- One broker, named to you first, with their state license number.
- No advice from us. Plans, rates and tax questions go to the licensed broker.
We are a free matching service, not a broker or insurer, and we do not quote or recommend plans. We look for a licensed benefits broker who suits your business and tell you who it is; your enquiry goes to them only with your go-ahead.
Thanks, your enquiry is in.
- Within one business day we will email or call to tell you which licensed benefits broker we have found, with their license number.
- Your details reach that broker only if you say yes.
- The broker reviews your renewal or your options and talks you through them. Whether to work with them is your choice. No marketing from us, ever.