Short answer: A level-funded plan is a self-funded arrangement packaged to feel like a fully insured one: the employer pays a fixed monthly amount covering claims funding, stop-loss premium, and administration, with a potential year-end refund if claims run low. It’s popular with small and midsize employers.
A level-funded health plan is a form of self-funding designed to give smaller employers the predictability of a fully insured plan with some of the upside of self-insurance. The employer pays a single, fixed monthly amount that is “leveled” across the year and split into three parts: a claims-funding account, a stop-loss insurance premium, and administrative/TPA fees.
Because the plan is technically self-funded, two things follow. First, if actual claims come in below what was funded, the employer may receive a surplus refund at year-end (terms vary by carrier), something a fully insured plan never returns. Second, stop-loss insurance caps the employer’s risk: specific stop-loss protects against any one person’s large claims, and aggregate stop-loss protects against the whole group running high.
Level-funded plans typically require medical underwriting (health questionnaires) at setup, so they tend to favor younger or healthier groups. As self-funded ERISA plans, they can also avoid some state-mandated benefits and state premium taxes. The main caution is renewal volatility: a group with a bad claims year may see a steep renewal or be unable to re-qualify, so it’s important the employer understands the risk before moving off a fully insured plan.
Sources
- Industry/secondary sources; see the TABA Self-Funded knowledge base (Self-Funding, Stop-Loss) for deeper mechanics. Verify specifics before CE use.
Content history
Originally published: June 16, 2026
Last reviewed: June 16, 2026