How does level-funded insurance work?

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.

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