4 ways level funded health plans help manage employer costs
Level funded plans offer the predictability of fully insured plans with additional savings opportunities, reporting and customization options.1
- Level funded plans are gaining rapid adoption among small employers - In 2025, 37% of small firms (3–199 employees) reported having a level funded plan, compared to just 7% in 2019, according to a KFF survey2
- Level funded plans can reduce costs by passing savings directly to the plan sponsor - Businesses with 2–50 employees that switched from a traditional, ACA-compliant fully insured plan to a UnitedHealthcare Level Funded plan saw an upfront savings of 19% on average3
- Level funded plans combine the predictability of fully insured plans with the flexibility of self-funding - Employers pay a fixed monthly amount covering maximum claims liability, administrative fees, and stop loss insurance, while also assuming some financial responsibility for claims — offering greater control over plan design
- Level funded plans incentivize workforce health through wellness programs and surplus sharing - Plan sponsors are insured against higher-than-expected claims and may receive a surplus share from lower-than-expected claims, creating an extra incentive to keep employees healthy
Level funded plans continue to gain traction in the health care market. In fact, in 2025, 37% of small firms, defined as those with 3–199 employees, reported having a level funded plan, compared to just 7% in 2019, according to a KFF survey.2 What’s driving increased adoption? As health care costs continue to rise and economic uncertainty persists, employers are seeking more cost-effective plan designs. Enter level funding.
Level funded plans may reduce costs by passing savings to the plan sponsor — unlike fully insured plans, where any savings remain with the insurer. With level funding, plan sponsors may earn a potential surplus share (where allowed by law).1 As a result, employers may see greater savings opportunities with the UnitedHealthcare Level Funded Plan. In fact, businesses with 2–50 employees who made the switch from a traditional, ACA-compliant fully insured plan to a UnitedHealthcare Level Funded plan saw an upfront savings of 19% on average.3
“UnitedHealthcare keeps building more value into our Level Funded plan. We’ve designed it with affordability in mind, so businesses can manage costs and still tailor benefits to meet their employees’ needs.”
Understanding level funded plans
While there’s been increased adoption of level funded plans, experts find that there’s confusion about how they work.2 This is understandable, given the complexity around how they’re funded and their regulatory requirements. However, at their core, level funded plans are generally self-funded plans with 3 key differences (though certain plan components may vary based on the carrier):
- Stop loss insurance to help mitigate claims risk
- An opportunity for a surplus share1
- A third-party claims administration agreement
Level funded plans can also include monthly reports with data that plan sponsors can use to track health care usage, as well as wellness programs that may increase plan participant engagement and reduce costs.
“Level funded allows us to be more agile and able to react quicker to changes and the needs of the market. As a type of self-funded health plan, level funded plans are built to provide the pricing stability plan sponsors want and need, and provide them an opportunity for a surplus share.”
Here’s how level funded health plans compare to self-funded and fully insured plans:
1. Balance of predictability, risk protection and flexibility
Like a fully insured plan, employers have the predictability of paying a fixed monthly amount that covers maximum claims liability, administrative fees and stop loss insurance that helps protect against unexpectedly high claims.
With level funding, however, plan sponsors assume some of the financial responsibility for providing health benefits by funding employee medical and pharmacy claims. This approach can offer greater flexibility and control over plan design. To support that flexibility, UnitedHealthcare has expanded its offering with customizable benefit and pricing options for employers with 51 or more employees.
Unlike traditional self-funded plans, which expose employers to the full fluctuation of claims costs, Level Funded plans include stop loss protection that limits claims liability. If claims are lower than expected, employers may also receive a potential surplus share, with adjustable surplus share percentages now available.
UnitedHealthcare continues to evolve its Level Funded offering based on customer feedback and market needs. Recent enhancements include optional benefit buy-ups for eligible groups, such as infertility coverage, weight loss surgery options and a premium rewards program.
2. Potential for a surplus share
With a fully insured plan, the insurer assumes the financial risk for providing health services to the plan sponsor group. For a fixed cost paid by the plan sponsor, the insurer pays covered health care claims and covers administrative expenses, broker service fees and taxes. At the end of the plan year, if the actual medical and pharmacy claims are higher than expected, the insurer pays them. The insurer keeps the difference if they’re lower.
In contrast, a plan sponsor with a Level Funded plan is insured against higher-than-expected claims costs, with the plan potentially receiving a surplus share resulting from lower-than-expected claims costs.
In other words, plan sponsors have an extra incentive to keep their workforces healthy to increase their potential surplus share.
“Our Level Funded offering for 51+ groups is evolving, delivering the customization, clarity and confidence brokers and employers need to design, quote and renew with confidence.”
3. Insights to manage costs
Plan sponsors with level funding can receive detailed monthly data reports to help them better understand participant utilization of health services and manage their benefits, which isn’t the case with most fully insured plans. This reporting provides greater insight into where and how health care dollars are being spent, which in turn allows plan sponsors to make informed decisions on how to improve participant health outcomes, optimize utilization of services and perhaps even strengthen their bottom line.
“Our monthly reporting package gives plan sponsors the data to spot trends in utilization in their population — so they can make decisions that may help their bottom line long before renewal,” Springer says.
These insights may enable plan sponsors to alert individual participants that:
- Low-cost generic medications can often be substituted for brand-name medications
- Urgent care may be more appropriate and less costly than the emergency room for certain conditions
- Virtual visits with a primary care provider can save time and money
“Detailed data reports are a huge advantage, especially for small businesses, by giving them insights into their virtual care usage, ER use, pharmacy utilization and network strategy,” Springer says. “Tracking these things over time and making informed decisions as needed can help drive a better member experience.”
4. Member-focused experience
UnitedHealthcare Level Funded plans include wellness programs and 24/7 virtual care options, which may help plan participants and their families play a more active role in their health care and save on out-of-pocket costs.
All Level Funded plan participants and their covered family members may be invited to join rewards programs, where they can earn dollars for completing healthy activities, such as tracking sleep and getting preventive care.
To offer participants more convenience, 24/7 virtual care is available for a variety of conditions, including general medical care and behavioral health counseling. In addition, UnitedHealthcare Level Funded plans offer $0 copays for dependent kids’ appointments and critical medications like insulin for diabetes.
Plan participants also have the option to purchase additional health, wellness and lifestyle offerings through UHC Store, a digital shop exclusive to UnitedHealthcare plan members that is available within the UnitedHealthcare® app and on myuhc.com®.
“The ease in which a plan participant can access their plan information and access additional benefits can help drive more effective utilization, which in turn could translate to lower-than-anticipated claims costs that may result in a surplus share,” Springer says.
The Surest® health plan is also available as a Level Funded option — bringing cost transparency to a new subset of consumers. With Surest, plan participants are empowered to make decisions that may affect plan sponsor costs, since the plan features an easy-to-use app, with clear upfront copays — not estimates.
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