Level-Funded Health Plans: A Cost-Saving Strategy for Small Businesses

A Smarter Health Insurance Strategy for Small Businesses

For small and mid-sized employers, offering affordable health insurance is critical—but costs and carrier rules can be overwhelming. That’s why many small businesses in New Jersey and Pennsylvania are turning to level-funded health plans as a practical alternative to fully insured group health plans. These plans blend the fixed costs of traditional insurance with the customization and savings potential of self-funded models, making them an ideal option for companies with 2 to 100 employees.

How Level-Funded Health Insurance Plans Work

A level-funded health plan consists of three core components:

1. Claims Fund (Employer’s Health Care Fund)

A portion of your fixed monthly premium is set aside to pay for your employees’ actual medical claims. If total claims are lower than projected, you may be eligible for a refund of the unused funds at year-end—an important cost-saving feature.

2. Administrative Costs

This includes fees paid to a third-party administrator (TPA) or insurance company to manage the health plan. Services typically include claims processing, customer support, network access (such as Aetna or Cigna PPO), compliance reporting, and more.

3. Stop-Loss Insurance

To protect your business against large, unexpected medical claims, stop-loss coverage is included in every level-funded plan. This coverage activates if individual or total group claims exceed a certain threshold, giving you peace of mind.

Key Benefits of Level-Funded Health Plans for Employers

One major advantage of level-funded plans is predictable monthly costs. Unlike fully self-funded models, your business pays a fixed monthly rate, making budgeting easier. If claims are low, you may receive a refund or credit at renewal—unlike with traditional health insurance, where unused funds stay with the carrier.

These plans also offer greater transparency. You’ll receive detailed claims data, allowing you to make informed decisions about wellness programs, plan design, and cost containment. If, for example, your data shows a high volume of ER visits, you could introduce a telemedicine option to reduce those costs.

Customization is another key feature. Level-funded health plans can be tailored to your workforce with features like high-deductible health plans (HDHPs), HSAs, wellness incentives, and provider networks suited to your location and industry.

Is a Level-Funded Plan Right for Your Business?

If your company has a healthy workforce and you're frustrated by high, inflexible premiums, a level-funded plan may be the solution. These plans are particularly well-suited for small businesses seeking more control, flexibility, and cost-efficiency.

Get Expert Guidance on Small Business Health Insurance

At Nexus Insurance Advisors, we specialize in helping small businesses throughout New Jersey and Pennsylvania evaluate and implement the right group health insurance strategy.

📞 Call us at 856-334-0131
📩 Schedule a free consultation today to explore level-funded health plan options tailored to your team.