Level funded plans may offer savings, flexibility and security
Discover how level funding blends self-funded flexibility and customizations with fully insured predictability — the best of both worlds.
Level funded plans continue to build momentum in the health care marketplace. In 2025, 37% of small firms (defined as 3–199 employees) reported having a level funded plan, compared to just 7% in 2019, according to KFF surveys.1 That growth is no accident. By combining the best of self-funded and fully insured plans, level funded plans are reshaping how plan sponsors approach health benefits.
So, what exactly is level funding? It's a health plan structure where the employer (the plan sponsor) makes a fixed, agreed-upon payment to either an insurer or a third-party administrator (TPA). This payment covers participant claims, administrative costs and any premiums for stop loss coverage. If plan participant claims come in lower than expected, the plan may receive a potential surplus share at the end of the plan year.2
Why level funding can be a game-changer
Level funded plans can offer a blend of flexibility and security, making them an attractive option for smaller to midsize businesses that might want to harness the best of both a self-funded plan and fully insured plan.
Level funded plans offer the flexibility and savings potential of a self-funded plan
One of the biggest advantages of a self-funded health plan is the ability to tailor it to the unique health needs of a workforce and make adjustments throughout the year based on detailed claims reports. These reports provide valuable insights that can help identify areas to drive better utilization by plan participants through targeted communications and track claims costs as they come in.
With level funding, these monthly reports are available, too.
And now the Surest® health plan is available for level funded groups — bringing cost transparency to a new subset of consumers. With Surest, plan participants are empowered to make informed health care choices that may affect plan sponsor costs since the plan features an easy-to-use app with clear, upfront copays.
Similar to self-funded plans, employers also have more choice, more control and more ways to personalize benefits for their workforce, including adjustable deductibles, copays, coinsurance, visit limits and infertility and obesity treatments, among others.
UnitedHealthcare Level Funded plans also put a range of conveniences and savings at participants' fingertips, from 24/7 virtual care and $0 copays for dependent kids' primary care provider (PCP) office visits and for certain prescriptions for vital medications like insulin and epinephrine, to rewards programs, where participants and their covered family members can earn dollars for completing healthy activities. Participants can also browse additional health, wellness and lifestyle offerings through UHC Store, a digital shop exclusive to UnitedHealthcare members available in the UnitedHealthcare® app and on myuhc.com®.
Another significant benefit of level funded plans is the potential for cost savings. When plan participant medical and pharmacy claims are lower than expected, a level funded plan sponsor may receive a potential surplus share. With a level funded plan, plan sponsors can share in these savings through a potential surplus share at the end of the year — but are protected if claims come in higher than projected.
UnitedHealthcare prices level funded plans based on the risk profile of a group, ensuring that healthier groups pay less. This approach makes level funding a smart and flexible choice for plan sponsors looking to optimize their health benefits while keeping costs in check. 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
Level funding offers predictability similar to a fully insured plan
The primary advantage of a fully insured plan is its stability and security. Many smaller employers opt for these plans because they ensure consistent monthly premiums. The plan sponsor pays a fixed premium to the carrier, who then takes on the risk and financial responsibility for all plan participant claims.
Still, as annual premiums are rising for fully insured plans, level funded plans, which offer a similar sense of stability through a fixed monthly cost but with the potential for a surplus share, may be more appealing. While plan sponsors directly pay for their plan participants' medical and pharmacy claims, they are protected from catastrophic expenses. If claims exceed the plan’s maximum, the carrier covers the excess costs, ensuring that the plan sponsor isn’t left on the hook for unexpected financial burdens.
Share
