Level-funded health insurance combines the budget predictability of a fully-insured plan with the savings potential of self-funding. If your group's claims come in lower than expected, you get money back. Buffer Insurance helps Texas employers evaluate whether level-funding is the right fit — and manage the plan if it is.
Get Your Free Assessment →Level-funded health insurance is a funding arrangement where an employer pays a fixed monthly amount — similar to a fully-insured premium — but that payment is divided into three components:
Here is the key difference from fully-insured: if your group's actual claims come in below the claims fund, the surplus is returned to you as the employer. With a fully-insured plan, the carrier keeps all unused premium — regardless of how healthy your workforce is.
Unlike fully-insured plans where your premiums subsidize other groups in a shared risk pool, level-funded plans are based on your group's own claims history and demographics. You are funding your own risk, with a safety net in place.
Each funding model has its place. The right choice depends on your group size, risk tolerance, claims history, and appetite for savings. Here is how they compare.
| Feature | Fully-Insured | Level-Funded | Self-Funded |
|---|---|---|---|
| Monthly Cost | Fixed premium | Fixed payment | Variable (claims-based) |
| Risk | Carrier bears all | Shared (stop-loss) | Employer bears most |
| Surplus Potential | None | Yes | Yes |
| Claims Transparency | None | Full | Full |
| Best For | Small groups (<25) | Mid-size (25–300) | Large (100+) |
| State Premium Tax | Yes (2–3%) | Often exempt | Exempt |
| ACA Community Rating | Applies | Often exempt | Exempt |
| Admin Complexity | Low | Moderate | High |
Level-funding is not the right fit for every employer. Here are the characteristics that typically align well with this funding model.
Level-funded plans are available for groups with as few as 5 enrolled employees, though employers with 25 or more typically see more stable rates and better pricing. Smaller groups can absolutely benefit from level-funding, but the underwriting is tighter and rate variability year to year can be higher with a smaller pool of claims experience.
Groups with lower-than-average claims history see the biggest savings with level-funding. If your group is subsidizing others in a fully-insured risk pool, level-funding lets you benefit from your own good experience.
Low turnover and consistent enrollment help carriers project claims more accurately. Groups with high employee churn can create underwriting challenges that reduce the cost advantage.
Employers who implement wellness programs, biometric screenings, or disease management initiatives amplify the savings potential of level-funded plans year over year.
Buffer evaluates fit during every free assessment. Not every group should be level-funded — and we will tell you directly if fully-insured or another arrangement is a better option for your team.
These anonymized case studies illustrate the kind of outcomes Texas employers have achieved after transitioning to level-funded plans with Buffer.
This group switched from a fully-insured plan after years of above-market renewals. Buffer analyzed three years of claims data, identified that the group's experience was significantly better than the fully-insured pool average, and moved them to a level-funded arrangement.
A growing professional services firm was concerned about rising premiums eating into margins. Buffer transitioned them to a level-funded plan. Actual claims came in well below projections, generating a surplus that the employer reinvested into expanded benefits.
Level-funding works best when it is actively managed — not just sold and forgotten. Here is what Buffer does at every stage.
We review 2-3 years of claims data to project costs, identify high-cost claimants, and determine whether level-funding offers a genuine cost advantage over fully-insured alternatives.
We negotiate specific and aggregate attachment points that balance premium cost against risk exposure. Getting stop-loss right is the single most important variable in a level-funded plan.
We shop across multiple level-funded carriers and TPAs to find the best combination of network, cost, contract terms, and surplus structure for your specific group.
We handle enrollment, employee communication materials, compliance documentation, and coordination with your payroll and HR systems. Your employees experience a seamless transition.
Monthly claims reports show how your actual claims are tracking against projections. Quarterly strategy reviews identify trends early so we can adjust before problems develop.
We begin the renewal review 120 days before your plan year ends. This gives us time to re-market, negotiate, and present alternatives — never a last-minute scramble.
Straightforward answers to the questions CFOs and HR leaders ask most about level-funded health insurance.