The Benefits of Level Funding for Your Business

Rising health insurance costs are a major challenge for business owners.

You want to provide great benefits to attract and retain talent, but traditional insurance plans often come with steep premiums and limited flexibility.

If you’ve considered self-funding your employee health plan but are concerned about unpredictable costs, level-funded health plans could offer the perfect middle ground – giving you control, flexibility, and cost predictability.

What Is Level Funding?

Level funding is a type of self-funded insurance plan designed to bring budget certainty to your health benefits strategy.

With level funding, your business pays a predictable monthly amount to cover:

• Projected medical claims (based on your group’s health data)
• Administrative fees
• Stop-Loss Insurance Premium: Protection against unexpectedly high claims (like catastrophic illnesses)

If your employees’ claims are lower than expected, you may receive a refund at the end of the year. If they’re higher, your stop-loss coverage kicks in to protect your business from overspending.

This model gives you the cost control of a fully insured plan, but with the financial advantages of self-funding.

Benefits of Level-Funded Health Plans

Here are some key benefits that make level funding an attractive option for organizations seeking more value and control in their benefits strategy:

1. Budget Predictability
With fixed monthly payments, you can confidently plan your annual health benefits budget – no more surprises from large claims early in the year.

2. Potential Refunds
If claims are lower than projected, your business can receive a refund for the unused funds, unlike traditional insurance, where unused premiums are kept by the carrier.

3. Cost Savings
Level-funded plans aren’t tied to community-rated premiums (used in fully insured plans). Instead, they reflect your employees’ actual health profile, which can mean lower costs.

4. Flexibility and Control
You get more freedom in plan design, network choices, and benefit options, helping you better meet employee needs.

5. Actionable Data Insights
Many level-funded plans include detailed reporting, helping you understand where healthcare dollars are going. This can guide smarter decisions, such as increasing access to telehealth or educating employees on using urgent care vs. emergency rooms.

6. Fewer Regulations
Level-funded plans are often exempt from certain state mandates and ACA community rating rules. Always check with your legal or compliance advisor for state-specific implications.

Considerations to Keep in Mind

While level funding offers many advantages, it's helpful to be aware of a few important considerations:

1. Administrative Costs
Level-funded plans include fees for claims administration and stop-loss insurance. While these provide valuable services and protection, they may slightly reduce overall savings compared to a fully self-managed plan.

2. Ongoing Claims Responsibility
Although your monthly payments are consistent, your business still plays a role in funding employee claims. Level funding helps smooth out these costs and provides added security through stop-loss coverage.

3. Plan Requirements
Some level-funded plans come with eligibility criteria, such as a minimum number of employees.

Is Level Funding a Good Fit for Your Business?

Level-funded health plans can be a smart solution for businesses that:

• Have a healthy workforce
• Need cost predictability and plan flexibility
• Employers interested in claims transparency

If you're looking for a benefits strategy that balances cost, quality, and control, level funding may be the right fit.

Start Your Level Funding Journey with Confidence

Level funding is a middle-ground solution for employers who want predictable costs but also want to benefit from good claims experience, without taking on the full risk of self-funding. It’s especially popular with small and mid-sized businesses looking for cost control and potential savings. For a more detailed comparison or have questions about how level funding might work for your organization, contact OneDigital today.

Interested in proven strategies to mitigate rising healthcare costs and protect your bottom line?
Explore more insights, tools, and real-world solutions and visit OneDigital's Cost Containment Hub.