A level-funded plan is a type of self-funded plan in which the employer contributes a steady monthly payment to cover costs for administration, claims payments and stop loss insurance. Level funding has its advantages when compared with fully insured plans and programs. Level-funded plans often cost less, making it easier for small and midsize employers to offer their employees high-quality health care benefits at a more affordable price.
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Fully insured vs. level funding: What's the difference?

With fully insured plans, premiums are paid directly to the insurer. With level funding, employers have insight into how their dollars are spent as monthly payments are divided among the following:
Claims account
A claims account is exactly what it sounds like. A portion of the monthly payment is used to pay for claims submitted by plan members.
Stop loss insurance
Stop loss is an employer’s safety net. This protects the employer against higher-than-expected claims. With level funding, employers will never have to pay more than the amount they are responsible for funding the claims account each year. After that, stop loss insurance kicks in.
Administrative costs
Administrative services are provided to the employer so they can spend their time focusing on their business while a third-party administrator handles plan management such as paying claims, customer service and other administrative tasks.
Opportunity for a refund

Say a group submits fewer claims than expected in a year. A portion (or all, depending on the plan selection) of the difference between the group's anticipated and actual claims is refunded back to the employer. Not only can employers potentially reduce their health care costs by switching to a level-funded plan, but the potential refund acts as additional savings on top of that.

What else is different?

The basis of level-funded plans is the accuracy of the rates that are unique to each group. Employers should not pay more than is needed for health coverage.

Self-funded plans are not subject to certain Affordable Care Act requirements. However, employer-established self-funded plans with Nationwide meet minimum essential coverage standards, and preventive services are paid at 100% when received from in-network providers as recommended by the Affordable Care Act.

Who is a level-funded plan for?

Level funding might be a great option for the group if:

  • They're a startup, small or midsize business
  • A fully insured model is too expensive but they want to offer employees quality health benefits
  • They want more control over their health care costs
  • They want a predictable monthly payment for the plan
  • Transparency on where their monthly payments are going is important to them

Are there different plan options?

A variety of plan options such as PPO, network-only and reference-based pricing are available and they can be customized to fit the needs of the business.

What else can be included in a plan to help save on health care costs?

Some carrier offerings may include access to additional health programs such as telemedicine and wellness programs.

Telemedicine services are designed to encourage plan members to make informed health care decisions. Visits through a designated virtual health care service often cost less than a doctor's office or urgent care visit, which helps save money on health care costs.

Wellness programs can help plan members start and maintain healthy habits that help them get and stay healthy. Healthier employees may be more likely to have lower health care claims costs.

Health benefits are an important factor in attracting and retaining employees

Many employees value affordable, high-quality health benefits with a variety of options from their employers. Health coverage is often a key factor in job satisfaction and can influence decisions on whether to stay with their current employer or accept a new position. Today's workers may also value plans that help cover out-of-pocket expenses associated with illnesses or accidents.

Making the switch

If level funding is such a great option, why aren't more employers switching to level funding? Many factors can contribute. Business owners:

  1. Might not know that level funding is an option
  2. May be hesitant to try a new program
  3. Are reissuing with their current plan because rates didn't go up a significant amount, not realizing that they may already be overpaying

A benefits professional can help employers find a quality plan that has:

  • The flexibility to customize the plan design to fit the needs of the group
  • High-quality products and customer service to match
  • Proven success, experience and reputation

Level funding used to be an option available only to large employers. However, as the market grew, this option is now available to small and midsize groups to help them gain control of their health care costs.

Nationwide offers small to midsize employers an opportunity to have a level-funded plan for their business through the Self-Funded Program.
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Related topics & resources

What is stop loss insurance?
Self-funded vs. fully insured health plans
4 reasons to pick our Self-Funded Program
How self-funding can help employers save
More self-funded resources

The Self-Funded Program through Nationwide provides tools for employers owning small to midsized businesses to establish a self-funded health benefit plan for their employees. The benefit plan is established by the employer and is not an insurance product. Stop loss insurance policies are underwritten by Nationwide Life and Benefits Insurance Company, Columbus OH, in AK, AR, AZ, CT, IL, MA, PA, TX, WI; Integon National Insurance Company in NY; and National Health Insurance Company in CO, WA and all other states where offered. Product availability and specific provisions may vary by state.