Level-Funded Health Plan

A level-funded health plan is a hybrid financing structure: the employer takes on a relatively small share of self-funded risk, backed by stop-loss insurance that caps the employer's exposure above a set threshold. It has grown particularly popular with small and mid-market employers who want some of the advantages of self-funding without the full cash-flow unpredictability of a traditional self-funded plan.

37% of covered workers at firms with 10 to 199 employees are now covered by a level-funded plan, per KFF's 2025 survey. If claims run below the funded amount for the year, the employer may receive a refund of the surplus. Several state regulators have raised concerns that level-funded plans, which can use health status in underwriting, draw healthier groups away from the ACA-regulated small-group risk pool.

That refund mechanic is exactly why claims reduction matters more, not less, to a level-funded employer than to a fully-insured one. Coming in under the funded amount doesn't disappear into a large insurer's broader risk pool—it comes back as cash at year-end. This is the same dynamic behind why self-funded employers carry more direct financial flexibility, extended down to a segment of smaller employers who wouldn't otherwise have access to it. A reduction in avoidable ED visits and unmanaged chronic conditions—the kind the OnMed CareStation^® is built to deliver—shows up in that same surplus a level-funded employer gets to keep.