Funding Arrangement · Level-Funded

Level-funded health insurance:
self-funded economics with a safety net.

See your actual claims data each month. Keep the surplus when claims are good. Stay protected by stop-loss when they aren't. For stable groups of 25-150 employees, level-funded is usually the smartest first move beyond fully-insured.

This page is the long version. If you'd rather just model your numbers: jump to the Health Funding Projector →

Best fit25–150 EEStable claims, want visibility
Typical savings5–15%vs. fully-insured, if claims favorable
Surplus participationYes50/50 split typical, some 100% return
Worst case (1 yr)+10–25%Capped by aggregate stop-loss

The carrier-margin question level-funded answers: "why am I paying 25-30% over actual claims to a carrier that won't even tell me what those claims are?"

How level-funded actually works

Every month you pay a fixed premium, just like fully-insured. But that premium isn't going into the carrier's general pool — it's split into three buckets:

At year-end the carrier reconciles. If your group's actual claims came in below the expected-claims fund, you get a refund — usually paid 90-180 days after plan-year close, sometimes as a check, sometimes credited toward next year's premium. If claims came in above expected, you don't owe more; that's what the stop-loss is for. You take the upside; the reinsurer takes the catastrophic downside. That's the whole pitch.

What you control vs. what you don't

The defining frame for any funding decision: who owns the risk, who owns the data, who owns the surplus, who owns the compliance burden. Level-funded sits in the middle of the spectrum — more control than fully-insured, less than self-funded.

Dimension Fully-Insured Level-Funded Self-Funded
Risk on bad yearCarrier (you pay fixed)Capped at 110-125% expectedYou bear it all to stop-loss
Surplus on good yearCarrier keeps it50/50 split or 100% return100% yours
Claims data accessLimited, delayedMonthly, full detailReal-time
Plan design flexibilityCarrier templatesCustomizable within carrier frameworkFully customizable
ERISA compliance burdenCarrier owns itShared (you're the plan sponsor)Fully on you
Cash flow predictabilityFixed monthlyFixed monthlyVariable claims-as-paid
Renewal volatility5-15% typical, up to 50%Smooths over multi-yearDriven by your data

What this looks like over five years for a 75-employee group

Same group, same demographics, three funding paths. Numbers are illustrative, anchored to KFF and Mercer benchmarks for 50-99 EE groups.

$22k $20k $18k $16k $14k Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Fully-Insured Level-Funded Self-Funded

By year 5, the level-funded path is roughly $3,300 per employee per year cheaper than fully-insured — about $247K/year on a 75-EE group. Self-funded is even lower if claims stay stable, but requires the cash-flow appetite and compliance infrastructure most 75-EE companies don't have. Level-funded is the bridge.

Where BENEFITRA actually adds value on a level-funded plan

Anyone can sell you level-funded. The carrier is the one taking the risk; the broker just collects the BOR. Here's what we do that most brokers don't:

Worked example · 62-EE manufacturer in MA

What level-funded looked like for one of our clients in 2025-2026

Established stable group, 62 enrolled employees, 8 years of clean claims history, manufacturing operation outside Boston. Coming off a fully-insured PPO that hit a 14% renewal increase.

Prior fully-insured annual cost
$1,116,000
Year 1 level-funded run rate
$987,500
Year-end refund (claims came in 9% under expected)
$44,300
Effective Year 1 savings vs. prior year
$172,800 (15.5%)

Same network, same plan design (within 1% of prior actuarial value), employees saw zero change in their experience. Renewal year 2 came in at +3.2%, vs. an industry-average 8-12% trend. This is what level-funded looks like when the group's claims are clean and the broker actually pays attention to the data.

Model your own numbers

The Health Funding Projector compares fully-insured, level-funded, self-funded, and captive across a 5-year horizon based on your group's size, location, and claims history.

Run your projection

Takes about 4 minutes. No email required for the basic projection.

Open the Health Funding Projector →

How level-funded stacks against the other six

Level-funded is one of seven funding paths Benefitra works with. Each has a sweet spot and an exit ramp. Pick the page that matters most for your situation:

Fully-Insured Self-Funded Self-Funded Captive ICHRA PEO-Integrated Taft-Hartley Compare all seven

Frequently asked questions about level-funded

How do level-funded refunds actually get paid back at year-end?
At year-end, the carrier reconciles your group's actual claims against the expected claims they collected from you each month. If actual claims came in below expected, you get a refund of the unused claims fund — typically 50/50 split with the carrier, though some carriers return 100% to the employer. Refunds usually arrive 90-180 days after plan-year close, paid as a lump check or applied as a credit against next year's premium. The amount is unpredictable: a stable group might see a 5-12% refund; a great year could be 18-25%. There's no refund (and no make-up bill, since stop-loss covers the upside risk) when claims exceed expected.
What's the difference between aggregate stop-loss and specific stop-loss in a level-funded plan?
Specific stop-loss protects you from a single big claimant — when one person's claims exceed a deductible (usually $50K-$200K per person per year on level-funded), the reinsurer pays everything above. Aggregate stop-loss protects you from total claims across the whole group exceeding a threshold — usually 110-125% of expected claims for the year. Most level-funded plans bundle both: specific is what saves you from one bad cancer case; aggregate is what saves you from a year where the whole group has a rough run. Knowing the attachment points on both is essential before you sign — a $50K specific deductible behaves very differently from a $200K specific deductible.
Can a level-funded plan get more expensive than fully-insured if claims are bad?
In a single bad year, no — that's what the stop-loss attachment is for. Your maximum out-of-pocket is capped by the aggregate attachment (typically 110-125% of expected claims). But over multiple years, a group with consistently bad claims will see renewals push level-funded rates up faster than a fully-insured plan would, because fully-insured pools your risk with thousands of other groups while level-funded prices YOUR risk specifically. So a one-bad-year scenario is contained; a chronic-bad-claims pattern eventually makes level-funded the more expensive choice. Honest answer: if your group has had two consecutive years of significantly elevated claims, level-funded is probably the wrong call.
What's the minimum group size for a level-funded health plan?
The technical minimum from most carriers is 5-10 enrolled employees, but the practical minimum where the math actually works is around 25 employees. Below 25, your monthly claims volatility can exceed the aggregate attachment frequency enough that you spend more time in stop-loss reimbursement than you save in expense load. The sweet spot is 50-150 employees: large enough that monthly claims smooth out, small enough that you still have plan-design flexibility. For groups of 5-25 employees, fully-insured or PEO is usually the better path; for 150+, traditional self-funded usually pencils out better.
How does a level-funded carrier decide my monthly premium?
The monthly premium is built from four components: expected claims (the carrier's estimate of what your group will spend on covered claims), administrative fees (claims processing, network access, ACA reporting), specific stop-loss premium (insurance against one big claimant), and aggregate stop-loss premium (insurance against a bad total year). On a 50-employee group, expected claims are typically 70-78% of the monthly bill, admin is 6-12%, and stop-loss together runs 12-18%. Carriers underwrite expected claims using your prior 12-24 months of claims data, your industry, your demographics (age, gender mix), and your geographic spread. If you have no claims history, expect the carrier to load 8-15% over what they'd quote a group with the same demographics and known claims.
What happens to my level-funded plan if a single employee has a $400K claim?
Specific stop-loss kicks in. If your specific deductible is $50K, the first $50K of that employee's claims is paid from your monthly claims fund just like any other claim. Once they cross $50K in a plan year, the reinsurer takes over — every dollar above $50K for that person is the reinsurer's responsibility, not yours. So a $400K claim costs your plan $50K, not $400K. The plan continues normally for everyone else. The catch comes at renewal: that employee may get "lasered" (assigned a higher specific deductible just for them, often $100K-$200K) or your specific deductible may rise across the board. Level-funded carriers vary widely on whether they laser at renewal — Benefitra's typical recommendation is to confirm the laser policy in writing before binding the plan.
Why do most carriers require 12 months of claims data before quoting level-funded?
Without claims data, the carrier is pricing blind — they have to assume worst-case demographics for your industry and geography, which usually loads 10-20% over a quote backed by real data. Twelve months gives them enough to see seasonality and identify any large claimants. If you're coming off a fully-insured plan, your prior carrier owes you a "claims experience report" on request — it covers the last 12-36 months of claims activity (typically with member identifiers redacted). Some level-funded carriers will quote off as little as 6 months, but expect a higher load. Coming off a brand-new group with no history at all, your only realistic options are fully-insured or a small-group level-funded product priced off zip-code-and-age-only — those products exist but rarely beat the rate of a fully-insured equivalent.

Want a level-funded quote that's actually grounded in your claims data?

Send us your last 12 months of claims experience and we'll pull stop-loss quotes from the three carriers most likely to fit your group — with the laser policy and renewal terms confirmed in writing before we present.

Schedule a free strategy call →