If you are a business owner reviewing your health insurance renewal and wondering why costs keep climbing, you are not alone. The traditional small group market continues to see steady increases year after year, often with little flexibility or transparency.

That is where level-funded health plans are starting to change the conversation.

What Is a Level-Funded Health Plan?

A level-funded plan is a hybrid between fully insured and self-funded insurance.

Instead of paying a fixed premium that disappears into the carrier’s pocket, your monthly payment is broken into three parts:

• Claims funding
• Stop-loss insurance (protection against large claims)
• Administrative costs

If claims are lower than expected, there is often a surplus refund back to the employer at the end of the year.

Why More Small Employers Are Considering Level Funding

Historically, level-funded plans were reserved for larger companies. That is no longer the case.

Today, many carriers are offering level-funded options for groups as small as 10 employees, making this strategy accessible to a much broader range of businesses.

Key advantages include:

• Potential for lower overall costs compared to small group plans
• Opportunity to receive surplus refunds
• Greater transparency into claims and spending
• Ability to customize plan design

The Downside of Traditional Small Group Plans

Small group plans in California are community-rated, which means:

• Rates are heavily influenced by age bands
• You do not benefit from having a healthier group
• Annual increases often fall in the 10–20% range

Even if your employees rarely use the plan, you are still paying into a system that does not reward lower utilization.

Is Level Funding the Right Fit?

Level-funded plans are not one-size-fits-all. They require underwriting and may not be ideal for every group.

However, for employers looking for:

• More control over their healthcare spend
• Long-term cost stability
• Alternatives to the fully insured market

…it is absolutely worth exploring.

Why Expertise Matters

Not every agency is comfortable navigating level-funded plans. It requires understanding underwriting, risk, stop-loss coverage, and long-term strategy.

At our agency, this is where we spend a significant amount of our time. We help employers compare:

• Level-funded options
• Traditional small group plans
• Self-funded and captive strategies

So you are not just choosing a plan—you are choosing the right financial strategy for your business.