In a level-funded model, the employer still pays monthly to a third-party administrator or carrier. However, rather than a “use-or-lose” fixed premium — like with small group insurance — the premium is held by the carrier and used to pay employees’ claims throughout the year.
At the end of the year, a portion of unused funds are refunded to the employers (minus administration fees and payments on stop-loss insurance). Stop-loss insurance covers the difference if the total claims are over the limit.