Level-funded acts like fully-insured (fixed monthly cost, no surprise bills) — but if your team stays healthy, the carrier returns the unused premium. Brokers don't quote them because the commission is structured differently. I quote them because they work.
If you've ever shopped group health, your broker probably pitched you a fully-insured plan. You pay a fixed monthly premium. The carrier takes all the risk. If your team has a high-claims year, your renewal next year goes up 15–25%. If your team has a low-claims year — the carrier keeps the difference.
Level-funded works differently. You still pay a fixed monthly amount. The carrier still takes the catastrophic risk via stop-loss reinsurance. But the carrier's claims fund — the part of your premium earmarked for actual claims — is held separately. If your team uses less than that fund predicts, you get a refund check.
| Trait | Fully-insured | Level-funded |
|---|---|---|
| Monthly cost | Fixed | Fixed |
| Surprise bills | None | None (stop-loss caps you) |
| Year-end refund | Never | If claims stay low |
| Renewal volatility | High (community-rated) | Lower (your group's data drives it) |
| Best for | Older / high-claims teams | Younger / healthier teams |
| Typical savings vs. fully-insured | — | 15–40% |
// The reason most brokers don't quote level-funded: the commission for fully-insured is paid as a fixed % of premium, year after year. Level-funded pays a flatter, less recurring commission. So if a broker only sells fully-insured, you should ask yourself: are they choosing what's best for you, or what's best for their next renewal commission?
Level-funded plans separate your premium into three buckets:
If your team's actual claims come in under the third bucket, the leftover is yours. That's the refund. It's not magic — it's just the carrier giving back the money they didn't need to spend on you.
// Hypothetical example for illustration. Actual quotes vary by carrier, census, and geography.
| Line item | Fully-insured | Level-funded |
|---|---|---|
| Monthly premium | $8,400 | $6,750 |
| Annual cost | $100,800 | $81,000 |
| Year-end claims refund (typical) | $0 | ~$8,000 |
| Effective annual cost | $100,800 | ~$73,000 |
| Annual savings | — | ~$27,800 (~28%) |
// The catch: level-funded is medically underwritten. The carrier looks at your census — ages, dependents, basic health questionnaire — before pricing. If you have one or two high-risk employees, the rate adjusts up. Some groups get rejected entirely. That's why I quote BOTH structures every time — so you actually have a comparison instead of a recommendation made for you.
I'll tell you flatly which bucket you're in. If level-funded isn't right for you, we stick with fully-insured and find a better carrier inside that lane.
// Dental, vision, life, disability — these get sold as "add-ons" but they're often where carriers make the most margin per dollar. Bundle them with your medical, and you can often get them at 20–30% below standalone pricing. Most brokers won't volunteer this because it complicates their pitch.
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