Glossary

Level-funded plan

A self-funded health plan with one fixed monthly payment covering expected claims, fees and stop-loss premium, with possible refunds if claims run low.

Also called: level-funded health plan, level funding, level-funded self-funding, level funded

A level-funded plan packages a self-funded health plan so it feels like fully insured coverage. The employer pays the same amount every month. That payment combines three pieces: a claims fund for expected claims, administrative fees for the claims administrator and the stop-loss premium. Stop-loss insurance reimburses the employer for claims above a specific per-person attachment point and, usually, an aggregate attachment for the whole group.

If claims for the year come in below the claims fund, some carriers refund the surplus or credit it to the next year. If claims run higher, stop-loss responds once the attachment is crossed, and in most designs the employer does not pay a surprise bill beyond the level payment. Terms differ on whether a refund exists, how long claims run out after the plan ends and whether the aggregate attachment resets at renewal.

The appeal is that healthier groups can pay less than they would under community-rated small-group pricing, because the plan is medically underwritten. Self-funded plans are generally governed by ERISA and not subject to many state mandates and some ACA small-group rules. The downside is renewal risk. A group with a large claimant may face a big increase, or stop-loss may set a higher deductible for that one person (called lasering), and moving to a new carrier means re-underwriting. The guide on level-funded health plans: how they work, who they suit and the catches compares the options, and fully insured vs self-funded health plans: which fits your business explains the larger choice.

Last reviewed October 10, 2026

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Related terms

Self-funded health plan A group health plan where the employer pays employees' claims itself rather than paying an insurer premiums, usually backed by stop-loss insurance. Stop-loss insurance Insurance that reimburses an employer with a self-funded health plan when one person's claims, or the plan's total claims, pass a set dollar level. Third-party administrator (TPA) An outside firm hired to run claims and administration for a self-funded plan, captive or self-insured program without taking on the insurance risk. Incurred but not reported (IBNR) An estimate of losses that have already happened, but that the insurer or plan has not yet been told about or has not fully valued. ERISA The 1974 federal law setting fiduciary, reporting and disclosure standards for private-sector retirement and welfare benefit plans, enforced by the DOL.

Related guides

Fully insured vs self-funded health plans: which fits your business How fully insured and self-funded health plans differ in risk, cash flow, regulation and data, with an example and the questions to answer before switching. Level-funded health plans: how they work, who they suit and the catches A level-funded plan is a self-funded plan with a fixed monthly payment, built-in stop-loss and a possible refund. How it works, who it suits, and what to check. Mental health parity rules for employer health plans in 2026 What MHPAEA requires of employer plans, the status of the 2024 final rule and its 2025 non-enforcement policy, and what to ask your carrier or TPA now. Stop-loss insurance for self-funded health plans: specific, aggregate and the fine print How medical stop-loss works for self-funded employers: specific and aggregate coverage, contract basis, lasers, run-out, claims and the terms to negotiate.

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