Level funded plans may offer savings, flexibility and security
Discover how level funding combines the flexibility of self-funded plans with the security of fully insured health plans, offering the best of both worlds.
Level Funded plans are revolutionizing the way plan sponsors approach health benefits, combining the best of both self-funded and fully insured plans. In 2024, 42% of small companies — ranging from 3 to 199 employees — opted for level funded plans, highlighting their growing appeal.1
But what exactly is level funding? It's a health plan structure where the plan sponsor (the employer) makes a fixed, agreed-upon payment to either an insurer or a third-party administrator (TPA). This payment covers participant claims, administrative costs and any premiums for stop loss coverage. If plan participant claims come in lower than expected, the plan may receive a surplus refund at the end of the plan year.2
Why level funding can be a game-changer
Level Funded plans can offer a blend of flexibility and security, making them an attractive option for smaller to midsize businesses that might want to harness the best of both a self-funded plan and fully insured plan.
Level funded plans offer the flexibility and savings potential of a self-funded plan
One of the biggest advantages of a self-funded health plan is the ability to tailor it to the unique health needs of your workforce and make adjustments throughout the year based on detailed claims reports. These reports provide valuable insights that can support your plan participants for more informed health decisions, potentially reducing costs and improving outcomes.
With level funding, you get these monthly reports too, offering clear direction on how to encourage your plan participants to:
- Save money: Substitute brand-name medications with generic alternatives
- Choose wisely: Opt for urgent care instead of the emergency room when appropriate
- Stay efficient: Use virtual visits with their primary care provider to save time and money
“For employers, there’s an incentive to help keep their employee populations healthier to drive for a greater surplus refund. With wellness programs and virtual care included with our level funded plans, we can help make this happen.”
Another significant benefit of self-funded plans is the potential for cost savings. When plan participant claims are lower than expected, a self-funded employer retains those savings. With a level funded plan, your plan shares in these savings through a potential surplus refund at the end of the year.
UnitedHealthcare prices level funded plans based on the risk profile of your group, ensuring that healthier groups pay less. This approach makes level funding a smart and flexible choice for plan sponsors looking to optimize their health benefits while keeping costs in check. As a result, plan sponsors may pay 22% less on average under a UnitedHealthcare Level Funded plan compared to a fully insured plan.3
Level funding offers the security of a fully insured plan
The primary advantage of a fully insured plan is its stability and security. Many smaller employers opt for these plans because they ensure consistent monthly premiums. The plan sponsor pays a fixed premium to the carrier, who then takes on the risk and financial responsibility for all plan participant claims.
Still, as annual premiums are rising for fully insured plans,4 level funded plans, which offer a similar sense of stability but with the potential for a surplus refund, may be more appealing. While plan sponsors directly pay for their plan participants' medical and pharmacy claims, they are protected from catastrophic expenses. If claims exceed the plan’s maximum, the carrier covers the excess costs, ensuring that the plan sponsor isn’t left on the hook for unexpected financial burdens.
“Level Funded plans mitigate risk associated with the self-funded model. There is no risk of additional liability outside of what is being funded.”
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