Learn how level-funded health plans offer predictable costs, financial protection, and potential savings.
A level-funded health plan combines predictable monthly costs with stop loss protection and the potential for year-end savings, offering employers a middle ground between fully insured and self-funded coverage.
As healthcare costs continue to rise, many employers are exploring alternative funding models. According to KFF’s 2025 Employer Health Benefits Survey, the average annual premium for employer-sponsored family coverage reached $26,993 in 2025, up 6% from the previous year.
|
Feature
|
Level-Funded
|
Fully Insured
|
Self-Funded
|
|---|---|---|---|
|
Monthly Cost |
Fixed |
Fixed
|
Variable
|
|
Claims Risk |
Shared (with stop-loss carrier) |
Carrier
|
Employer
|
|
Transparency |
Moderate to high
|
Limited
|
High
|
|
Plan Customization |
Moderate to high
|
Limited
|
High
|
|
Potential Refunds |
Yes
|
No
|
Yes
|
The main difference between these plan types is who assumes financial risk. Level-funded plans fall between fully insured and self-funded plans, offering predictable monthly costs with stop loss protection.
Level-funded health plans offer a balance of cost predictability, flexibility, and transparency. Key benefits include:
Level-funded health plans may not be the right fit for every employer. Before making the switch, employers should consider:
Reference-based pricing (RBP) is one approach employers can use with a level-funded health plan to help manage healthcare costs. Providers are reimbursed using a fair reference price rather than negotiated network rates, helping improve transparency and cost control. Imagine360 pairs RBP with advocacy support to help members navigate care and billing questions with confidence.
Learn more about reference-based pricing.
Level-funded health plans are often a good fit for organizations that want more control over healthcare costs without taking on the full risk of self-funding. Growing interest in alternative funding models reflects this shift: according to KFF’s 2025 Employer Health Benefits Survey, 63% of covered workers are enrolled in self-funded plans, including 27% of workers at small firms.
Common characteristics include:
LEVEL-FUNDED HEALTH PLANS: EMPLOYER GUIDE
Still have questions? Here are answers to some of the most common questions employers ask about level-funded health plans.
No. A level-funded plan is a type of self-funded health insurance, but it combines fixed monthly payments with stop loss protection to provide greater cost predictability.
Yes. Most level-funded plans provide access to claims data and reporting, helping employers better understand healthcare spending and make more informed benefits decisions.
If claims come in under budget, groups may receive a refund of unused claims dollars at the end of the plan year. These savings can be reinvested in their business or used to enhance employee health benefits.
Stop loss insurance helps protect employers from large or unexpected claims. However, higher claims experience may impact future renewal costs.
They can be. Level-funded plans often provide opportunities for savings through lower administrative costs, greater transparency, and potential refunds when claims are lower than expected. Actual savings vary based on workforce demographics, claims experience, and plan design.
