How level funding works
The business pays a fixed monthly amount, like a premium. Part covers administration and stop-loss insurance, and part goes into a fund that pays claims. If claims come in lower than expected, some plans refund or credit part of the unused fund at year end. Stop-loss coverage protects the business if claims are much higher than expected.
Why healthy groups benefit
Level-funded plans are usually underwritten on the group's health, so a healthy group can be offered lower rates than a fully insured small-group plan, and low claims can produce a refund. Groups with a few large claims may be quoted higher rates or may do better with a standard fully insured plan.
Who it fits
You need a real business with eligible employees; minimum group sizes and participation rules vary by carrier and state. A sole proprietor with no employees cannot use a group plan for themselves. Compare level-funded quotes with fully insured small-group plans and an ICHRA, and read the stop-loss contract and refund terms carefully.
2027 by the numbers: Owner, age 45, plus staff
| Benchmark Silver, full price | $795/month |
| Typical Bronze HSA plan (about 22% less) | $620/month |
| Premium saved per year | $2,100 |
| 2027 HSA contribution limit | $4,500 |
| Federal tax saved on a full HSA at 24% / 32% | $1,080 / $1,440 |
2027 national average benchmark from KFF ($704/month at age 40), scaled with the federal age curve; Bronze discount is a typical ratio, not a quote. HSA limits from IRS Rev. Proc. 2026-24.
Who this fits, and who should skip it
| Good fit if | Think twice if |
|---|---|
| You have eligible W-2 employees | You are a solo owner with no employees |
| Your team is relatively healthy | Your group has large ongoing claims |
| You want a chance at a year-end refund | You want the simplest contract |
A real-world example
A five-person design firm with a young, healthy team moves from a fully insured plan to a level-funded plan with similar benefits at a lower monthly cost. At year end, claims were below the fund, and the carrier credits part of the surplus to the next year.
Illustrative example using 2027 national averages (KFF benchmark of $704/month at age 40, federal age curve); not a quote.Benefits and tradeoffs
| What you gain | What to weigh |
|---|---|
| Healthy groups can get lower rates | Underwriting means rates depend on group health |
| Possible refund or credit in low-claim years | Refunds are not guaranteed |
| Stop-loss limits the downside | Contracts are more complex |
| Benefits can be similar to traditional plans | Needs eligible employees; not for solo owners |
Your next steps
- Gather your census: employees, ages and ZIP codes.
- Request level-funded and fully insured quotes.
- Read the refund and stop-loss terms.
- Compare with an ICHRA allowance.
- Review results every renewal.
Questions people ask
Can a one-person business get a level-funded plan?
Generally no. Group plans need eligible employees who are not owners or owners' spouses, though rules vary.
What happens in a bad claims year?
Stop-loss insurance covers claims above set limits, and the next renewal may be priced higher.
Is a level-funded plan self-insured?
Technically it is a self-funded arrangement with stop-loss coverage, which is why its rules differ from fully insured plans.
See what a healthy person in your situation can pay.
A licensed agent compares HSA, Bronze, underwritten and private options in your state, side by side, and explains exactly what each one covers and excludes.
Start your free quote →Prefer to talk? Call (954) 805-7882Sources
- HealthCare.gov: Health insurance options for small businesses
- HealthCare.gov: Small business coverage eligibility
- HealthCare.gov: Comparing group coverage and HRAs
Published November 3, 2026. General education, not tax or legal advice. Plan availability, underwriting, benefits and tax treatment depend on the product, state and household. Confirm with the policy documents and a qualified tax professional.