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.
Self-Funding
In a self-funded plan the employer pays employees’ claims directly, usually with stop-loss protection. These FAQs explain how self-funding works and when it fits.
What’s the difference between fully insured and self-funded health plans?
In a fully insured plan the employer pays premiums and the insurance carrier bears the claims risk. In a self-funded plan the employer pays claims directly (usually with stop-loss protection and a third-party administrator), taking on more risk in exchange for cash-flow control, claims data, and ERISA preemption of many state insurance mandates.
What is a self-funded (self-insured) health plan?
In a self-funded plan, the employer pays employees’ medical claims directly out of its own funds, usually with a third-party administrator (TPA) to process claims and stop-loss insurance to cap catastrophic risk, instead of paying fixed premiums to an insurer.
Why would an employer choose to self-fund?
Employers self-fund to gain control: access to their own claims data, ERISA preemption of state mandates and premium taxes, cash-flow advantages, the ability to keep savings in a good year, and freedom to customize the plan and its cost-containment strategies. The trade-off is taking on claims risk.