Why More Small Businesses Are Turning to Level-Funded Health Plans

If you’re a small or midsized business owner, you know the challenge: health insurance premiums keep climbing, but your team still expects meaningful benefits.

Balancing affordability with competitiveness isn’t just difficult; it’s often unsustainable.

That’s why more employers are turning to level-funded health plans. This evolving option offers a compelling middle ground, combining the cost predictability of fully insured plans with the savings potential and flexibility of self-funding.

What Is a Level-Funded Health Plan?

Think of level funding as a personalized approach to health benefits, crafted with small and midsized businesses in mind. Instead of being locked into premiums based on a broad and unpredictable pool, you pay a consistent monthly amount that covers:

• Expected claims based on your team’s unique health profile
• Administrative costs, for plan operations
• Stop-loss insurance, which protects you from catastrophic claims

Here’s where it gets interesting: if your employees’ claims come lower than projected, you may receive a year-end refund. In other words - money back when your team stays healthy.

How Can We Assist You in Controlling Claims?

Partnering with the right advisor can make a significant difference in the long-term success of a level-funded plan. At OneDigital, we help employers implement smart, strategic measures to manage claims and maximize plan value.

• Plan Design Optimization – We tailor plans that encourage smarter care choices, such as prioritizing preventive care and expanding access through virtual health services.
• Employee Education & Engagement – Helping employees understand how to use their benefits - choosing in-network providers, opting for generic prescriptions, and knowing when to use urgent care vs. the ER - can lead to major cost savings and better outcomes.

Why Are More Employers Making the Switch?

Fully insured plans lump your business in with countless others - some of whom may have high claims that inflate your rates. This can feel like a system stacked against you.

Level-funded plans put you back in control. With the right strategy and support, they offer:

• Lower monthly costs, tailored to your workforce
• Fixed payments, so you can plan your budget with confidence
• Refund potential, when claims are below expectations
• Plan flexibility, allowing you to meet employees where they are
• Actionable data, for smarter benefits decisions

And if your claims exceed expectations? You’re protected. There’s no year-end surprise bill. You simply renew and adjust your plan for the year ahead.

Is Level Funding Right for Your Business?

While level funding offers powerful advantages, it’s not a one-size-fits-all solution. It’s often a strong fit for companies that:

• Have a relatively healthy team
• Employ between 5 and 200 people (depending on the carrier)
• Want greater control over costs and plan design
• Are open to employee engagement and plan management

If your workforce has higher-than-average claims or you prefer to minimize compliance responsibilities, level funding may be something to revisit when your situation evolves.

What About Compliance and Risk?

Level-funded plans are legally considered a form of self-insurance. That brings some welcome freedom - like exemption from state benefit mandates and ACA community rating rules - but also a greater role for employers in meeting federal compliance requirements.

When you're fully insured, your carrier handles much of the behind-the-scenes legwork. With level funding, some of that responsibility shifts to you, including:

• Form 1095-C reporting (for applicable large employers)
• COBRA administration
• ERISA compliance and documentation
• PCORI fee payments
• Providing Summary Plan Descriptions (SPDs)

This may sound daunting, but you’re not alone.

At OneDigital, we guide you every step of the way. We simplify what’s complex and help you navigate requirements with confidence - so you can focus on your people, not paperwork.

How OneDigital Optimizes Level Funding

We don’t just sell benefit plans - we build long-term strategies that grow with your business. Our approach to level funding includes:

• Custom Plan Design – Thoughtfully built around your workforce and goals
• Carrier & TPA Expertise – We connect you with trusted partners that deliver value
• Compliance Management – Keeping you ahead of every requirement
• Data-Driven Insights – Real-time analytics to help you stay proactive and agile

The Bottom Line

Level-funded health plans are no longer just for big companies. They’re now a real, viable solution for small and midsized businesses seeking balance - between cost, quality, and control.

If rising premiums are squeezing your budget, this may be the moment to explore something better.

Ready to take the next step? Contact OneDigital today to start the conversation.