🔒 Licensed Texas Broker - TDI License #1816327 | Serving TX Employers Since 2010
Level Funded Health Insurance for Texas Employers (2026)
Pay a fixed monthly amount. Keep the surplus when your employees stay healthy. Here's exactly how it works - including the risks.
10-25%Avg savings vs. fully insured
9TX carriers available
5-500Employee groups eligible
Year-endClaims surplus refund
What Is Level Funded Health Insurance?
A self-funded plan structure with a fixed monthly payment - split into three buckets.
🏦
Claims Fund
The largest portion of your monthly payment goes into a claims reserve. Your employees' medical claims are paid from this fund throughout the year. If claims are lower than funded, the unused balance is returned to you.
🛡️
Stop-Loss Insurance
Protects you from catastrophic claims. Specific stop-loss caps your exposure per individual (e.g., $30,000). Aggregate stop-loss caps your total group exposure for the year. Above those thresholds, the insurance carrier pays.
⚙️
Administration (TPA)
Covers claims processing, network access, member services, and reporting. Paid to a Third Party Administrator (TPA) - this portion is fixed and non-refundable regardless of claims performance.
Level Funded vs. Fully Insured - Complete Comparison
12 factors Texas employers should evaluate before choosing a plan structure.
| Factor | Level Funded | Fully Insured (ACA) |
|---|---|---|
| Monthly Premium | Fixed - predictable | Fixed - predictable |
| Average Cost | 10-25% lower for healthy groups | Baseline ACA community rates |
| Claims Surplus Refund | Yes - unused claims fund returned | No - carrier keeps all surplus |
| Medical Underwriting | Yes - health history reviewed | No - guaranteed issue |
| Stop-Loss Protection | Yes - specific and aggregate | Yes - built into carrier risk pool |
| Claims Risk to Employer | Yes - up to stop-loss threshold | None - fully insured |
| Plan Design Flexibility | High - customize deductibles, networks | Limited to carrier plan options |
| ERISA Governed | Yes - not subject to state mandates | State mandates apply |
| Claims Transparency | Full monthly reporting | Limited or no data shared |
| Renewal Risk After Bad Year | Higher - based on your claims | Community-rated, more stable |
| Minimum Group Size | Typically 5+ employees | 1+ employee |
| Best For | Healthy groups 10-500 employees | Small groups, high-risk employees, new businesses |
Real Texas Employer Examples - Honest Outcomes
What level funding actually looks like across best, average, and worst-case scenarios. All numbers are representative based on real plan data.
✅ Best Case
Austin Tech Firm - 42 Employees
Prior fully insured premium$68,400/mo
Level funded monthly cost$50,900/mo
Annual premium savings$210,000
Year-end claims surplus refund$38,400
Stop-loss threshold (specific)$30,000/member
💰 Total first-year benefit: $248,400 - a 25.5% reduction in health plan costs. Healthy, tech-forward workforce with low utilization drove the surplus.
📊 Average Case
Dallas Logistics Company - 78 Employees
Prior fully insured premium$128,000/mo
Level funded monthly cost$111,500/mo
Annual premium savings$198,000
Year-end claims surplus refund$14,200
Stop-loss threshold (specific)$40,000/member
📈 Total first-year benefit: $212,200 - a 12.9% reduction. Mixed workforce with a few higher-utilization members, but still well below stop-loss thresholds.
⚠️ Worst Case
Houston Construction Co. - 31 Employees
Prior fully insured premium$49,600/mo
Level funded monthly cost$43,900/mo
Annual premium savings$68,400
Year-end claims surplus refund$0
Stop-loss activated?Yes - 1 employee
⚠️ Net savings: $68,400 on premiums, but no refund. One employee had a $62,000 cardiac event - stop-loss paid the excess above $30K. Still saved money, but renewal rates increased 18% the following year.
* All examples are representative scenarios based on 2024-2025 Texas plan data. Your results will vary based on group size, health history, and carrier selection. Past savings do not guarantee future results.
How Level Funding Lowers Costs - Short and Long Term
Understanding where the savings actually come from.
📅 Short-Term Savings (Year 1)
- Underwriting prices your group based on actual health history - not a community pool
- Healthy groups immediately pay less than ACA community rates
- Year-end surplus refund if claims come in under budget
- ERISA preemption eliminates some state-mandated benefit costs
- More network options - often access to leaner, high-efficiency networks
📈 Long-Term Savings (Years 2+)
- Full claims transparency lets you identify high-cost conditions and intervene early
- Wellness programs and care management are worth investing in - you see the ROI directly
- Good claims years compound: strong history = favorable renewal pricing
- Surplus refunds can be reinvested into HSA contributions or benefit enhancements
- Employers who actively manage utilization often achieve 3-5 year premium stability
Texas Level Funded Carriers (2026)
We work with all major carriers offering level funded plans in Texas. Availability and minimum group sizes vary.
BCBSTX - Blue Balance Funded
Min group: 2 employees
Largest network in Texas. Strong hospital access statewide. Excellent for groups wanting brand-name coverage with self-funded savings.
UnitedHealthcare - All Savers
Min group: 2 employees
UHC's level funded product with Choice Plus network access. Strong national network - good for groups with employees in multiple states.
Aetna - Funding Advantage
Min group: 5 employees
Competitive stop-loss terms and solid claims reporting tools. Good for employers who want detailed analytics and care management programs.
Sana Benefits
Min group: 5 employees
Tech-forward carrier built specifically for small businesses. Transparent pricing, zero-cost primary care, and excellent member experience. Strong in Austin/Dallas tech companies.
Arlo Health
Min group: 5 employees
Newer entrant with competitive pricing for Texas small groups. Emphasizes cost transparency and direct primary care integration.
Trustmark Small Business Benefits
Min group: 2 employees
Specialty carrier for very small groups (2-9). Low minimum participation requirements. Good option when other carriers won't write the group.
Allied National
Min group: 2 employees
Flexible plan designs with competitive stop-loss. Works well for industries with mixed health profiles or part-time workforce challenges.
Allstate Benefits
Min group: 5 employees
Strong supplemental and level funded combination packages. Good for employers wanting to bundle medical, dental, and voluntary benefits with one carrier.
Surest (formerly Bind)
Min group: 51 employees
Innovative consumer-driven model with no deductibles - members see costs upfront. Best for employers 51+ who want to shift behavior and reduce waste.
Not sure which carrier fits your group? Get a comparison quote - we'll run your group across all eligible carriers and show you side-by-side options.
⚠️ Who Should NOT Choose Level Funding - We'll Tell You Straight
Level funding is not the right fit for every employer. We'd rather tell you now than have you discover it at renewal. If any of these apply, we'll steer you to a fully insured plan instead.
- Employees with serious chronic conditions - active cancer treatment, dialysis, organ transplants, or hemophilia will likely make level funding uncompetitive or ineligible. Fully insured is better.
- Groups under 5 full-time employees - too small to absorb claims variance. ACA small group plans provide more predictable pricing.
- High employee turnover industries - if your workforce changes significantly each year, underwriting history loses value and stop-loss contracts become harder to maintain.
- Zero risk tolerance - if the idea of a year without a surplus refund and a potential renewal increase is unacceptable, fully insured eliminates that uncertainty.
- New businesses with no health history - without prior claims data, underwriting is conservative and initial pricing may not be competitive. Wait until year 2.
- Groups that recently had a catastrophic claim - stop-loss carriers will price that risk into the stop-loss premium, often eliminating the savings advantage entirely.
Level Funded Health Insurance - FAQ
Straight answers, including the downsides.
What is itWhat exactly is level funded health insurance?
A self-funded plan structure where you pay a fixed monthly amount covering three components: a claims fund (the money used to pay your employees' claims), stop-loss insurance (protects you from catastrophic claims), and TPA administration fees. At year-end, unused claims fund money is returned to you as a surplus refund. The premium is "level" - you pay the same each month - but the underlying economics are self-funded.
ProHow much can we realistically save?
For healthy groups, 10-25% below comparable ACA fully insured premiums is realistic in year one. Add potential year-end surplus refunds (which we've seen range from $0 to $50K+ depending on group size and claims). Over 3-5 years, groups with disciplined wellness programs and low utilization can achieve cumulative savings of 30-40% vs. staying on fully insured. We can model your specific group after seeing your current premium and census.
ConWhat happens if we have a bad claims year?
Two things happen: (1) You won't receive a surplus refund - the claims fund is fully or partially depleted. (2) Your renewal will likely reflect the adverse claims experience - typically a 15-30% increase, though this varies by carrier. Your stop-loss insurance means you won't pay more than the capped maximum for the year, but your future premiums will price in the risk. This is the primary downside of level funding. It's why we model multiple scenarios for every group before recommending it.
ProDo we get access to our claims data?
Yes - this is one of the biggest underappreciated advantages. With level funding, you receive detailed monthly claims reports showing utilization by category (pharmacy, ER, specialist, etc.), though not by individual to protect HIPAA. This data lets you make intelligent decisions about wellness programs, care management, and network selection. Fully insured carriers rarely share this level of detail.
NeutralHow does underwriting work for level funded plans?
Groups of 1-50 employees typically complete simplified medical underwriting - employees answer health questions, and the carrier reviews any conditions disclosed. Groups 51+ are usually fully medically underwritten using prior claims data. Employees with serious health conditions (cancer, dialysis, transplants) may be excluded from level funding eligibility, making the plan unavailable for those groups or triggering exclusions that complicate HR administration. This is fundamentally different from ACA guaranteed-issue fully insured plans.
ConCan our renewal rates spike after one bad year?
Yes - and significantly. We've seen renewals increase 25-40% after a single catastrophic claim year, even with stop-loss coverage. Stop-loss protects you from the claim itself, but it doesn't prevent the stop-loss carrier from increasing your stop-loss premium at renewal. After two consecutive bad years, you may also find it difficult to move carriers, as your claims history follows you. This is one reason we recommend building a minimum 3-year commitment mindset when switching to level funding.
ProIs level funding ACA compliant?
Yes, with important nuances. Level funded plans are self-funded arrangements governed by ERISA, which preempts most state insurance mandates. They must still comply with applicable federal ACA provisions (preventive care, no lifetime limits, mental health parity, etc.). However, for employers with fewer than 50 FTEs, level funded plans are NOT subject to ACA small group community rating rules - which is precisely why they can offer lower rates to healthy groups, but also why underwriting applies.
NeutralWhat is stop-loss insurance and how does it protect us?
Stop-loss has two layers: (1) Specific stop-loss - caps your exposure per individual member per year (e.g., $30,000). Any claims above that threshold for a single person are covered by the stop-loss carrier. (2) Aggregate stop-loss - caps your total group claims liability for the year (typically 125% of expected claims). If your whole group has an exceptionally bad year, aggregate stop-loss kicks in above that threshold. Together, these convert what could be unlimited employer liability into a capped, predictable cost - the core mechanism that makes level funding viable for small and mid-sized employers.
ProCan we keep our current doctors and hospitals?
That depends on the carrier and network you select. BCBSTX Blue Balance Funded and UHC All Savers offer broad networks comparable to their fully insured products. Newer carriers like Sana and Surest use narrower or direct-contract networks that can offer lower costs but require checking specific providers. We always run a provider access check for your key employees' preferred physicians and hospitals before recommending a specific carrier.
ConWhat are the administrative requirements we should know about?
Level funded plans require more employer involvement than fully insured plans: (1) You must file a Form 5500 annually (ERISA requirement for self-funded plans). (2) You'll receive and review monthly claims reports. (3) You're responsible for maintaining a Summary Plan Description (SPD). (4) Some carriers require you to review and sign off on stop-loss invoices separately. (5) Year-end surplus calculation and distribution has its own process. None of this is unmanageable - most employers handle it through their broker or HR platform - but it is more than signing a renewal with a fully insured carrier.
✅ Pros of Level Funding
- Lower monthly premiums for healthy groups (10-25%)
- Year-end surplus refund if claims are low
- Full monthly claims data and transparency
- Flexible plan design - customize to your workforce
- ERISA preemption of state mandates
- Incentivizes wellness investment (you see the ROI)
- Stop-loss caps catastrophic exposure
- Multiple Texas carrier options with strong networks
⚠️ Cons of Level Funding
- Medical underwriting - not guaranteed issue
- Claims risk between $0 and stop-loss threshold
- Renewal rates can spike after a bad claims year
- More administrative work (Form 5500, SPD, reports)
- Employees with serious conditions may be excluded
- Stop-loss premiums increase after high-claim years
- Not recommended for groups under 5 employees
- Requires multi-year commitment for best results
Ready to Find Out If Level Funding Is Right for Your Texas Business?
We'll run your census through all 9 Texas carriers, show you the numbers side-by-side, and give you a straight recommendation - even if it's fully insured. TDI License #1816327.
No obligation · Texas employers only · Results within 24-48 hours
📋 Sample Level Funded Employer Statement
What your monthly invoice and claims report actually look like - line by line. This is a representative 45-employee Texas manufacturer on a level funded plan. Numbers reflect typical 2025 plan year values.
Lone Star Precision Manufacturing LLC
Plan: Level Funded PPO · Plan Year: Jan 1 - Dec 31, 2025
Enrolled Employees
45
EE Only
18
EE + Spouse
12
EE + Children
9
EE + Family
6
Total Covered Lives
127
Fixed Monthly Components - Per Enrolled Employee
Rate per EE · Count · Total
Line Item
Rate / EE
Enrolled
Amount
Expected Claims Fund
Funds the pool that pays your employees' medical claims. Held in trust - unused dollars returned at year-end.
$498.00
45
$22,410.00
Specific Stop-Loss Premium
Per-member protection: insurer pays claims above $75,000/member/year. Mandatory. Non-refundable.
$64.50
45
$2,902.50
Aggregate Stop-Loss Premium
Group-level protection: insurer pays if total plan claims exceed 120% of expected annual claims ($359,064).
$18.75
45
$843.75
TPA Administration Fee
Claims processing, member services, EOB issuance, ID cards, UM/UR, provider appeals.
$32.00
45
$1,440.00
Network Access Fee (PPO)
Access to carrier contracted PPO network rates. Billed separately from TPA admin.
$14.25
45
$641.25
Pharmacy Benefit Manager (PBM) Fee
PBM administration, formulary management, drug utilization review, specialty management.
$8.50
45
$382.50
Employee Assistance Program (EAP)
6 counseling sessions/year per employee. Mental health, financial counseling, legal referral.
$3.00
45
$135.00
Wellness Program Access
Biometric screening platform, HRA questionnaire, wellness incentive tracking.
$2.50
45
$112.50
SUBTOTAL - Employer Cost (Before Employee Contributions)
$641.50/EE
45
$28,867.50
Employee Contribution Credits (Payroll Deduction)
EE-Only Contributions (18 × $185.00/mo)
Employee share of premium deducted from payroll pre-tax under Section 125 cafeteria plan.
$185.00
18
−$3,330.00
EE + Spouse Contributions (12 × $320.00/mo)
$320.00
12
−$3,840.00
EE + Children Contributions (9 × $295.00/mo)
$295.00
9
−$2,655.00
EE + Family Contributions (6 × $445.00/mo)
$445.00
6
−$2,670.00
TOTAL EMPLOYEE CONTRIBUTIONS
−$12,495.00
NET EMPLOYER INVOICE - SEPTEMBER 2025
$16,372.50
$641.50
Total cost per enrolled employee/month
$364.17
Net employer cost after employee contributions
$277.78
Average employee contribution per employee
43.3%
Employee contribution as % of total cost
* The Claims Fund ($22,410/mo · $268,920/year expected) is held in trust on the employer's behalf. If plan year actual paid claims are below $268,920, the surplus is returned to the employer at year-end settlement, less any applicable margin. Stop-loss premiums are fully earned and non-refundable. TPA, network, PBM, EAP, and wellness fees are fixed administrative costs that do not vary with claims experience.
📋 Sample Self-Funded (ASO) Employer Statement
What a self-funded employer's monthly invoice and claims reports look like - separated into fixed admin costs and variable claims paid. This represents a 210-employee Texas manufacturer on an ASO self-funded plan with stop-loss. Two tabs cover the monthly ASO invoice and the full claims analysis with stop-loss tracker.
Hill Country Fabrication Inc. - Self-Funded Health Plan
ASO Self-Funded PPO · TPA: HealthSmart · PBM: Express Scripts · Plan Year: Jan 1 - Dec 31, 2025
Enrolled Employees
210
Covered Lives
487
EE Only
84
EE + Dep
126
Avg Family Size
2.32
Fixed Administrative Fees (Non-Claims - PEPM Basis)
Rate/EE · Count · Monthly Total
Service
PEPM Rate
Enrolled
Amount
TPA Administration - HealthSmart
Claims adjudication, member services, EOBs, provider network access, UM/UR, appeals management
$28.50
210
$5,985.00
PPO Network Access Fee - HealthSmart TX
Access to HealthSmart's Texas proprietary PPO network - discounted hospital and physician rates
$12.00
210
$2,520.00
Specific Stop-Loss Premium - Sun Life Financial
Per-member stop-loss: plan pays claims above $100,000/member/year. Employer pays up to $100K; carrier pays above.
$48.20
210
$10,122.00
Aggregate Stop-Loss Premium - Sun Life Financial
Group stop-loss: carrier pays if total annual claims exceed 125% of expected ($1,386,000). Expected annual = $1,108,800.
$14.75
210
$3,097.50
PBM Administration - Express Scripts (Evernorth)
Formulary management, drug utilization review, mail order administration, specialty management (Accredo)
$7.80
210
$1,638.00
Rx Network Access (Retail Pharmacy Network)
Access to 68,000 contracted retail pharmacies nationwide including TX-specific independent pharmacies
$2.40
210
$504.00
Care Management / Disease Management Program
Chronic condition outreach (diabetes, hypertension, CHF), high-cost case management, NICU/transplant coordination
$4.50
210
$945.00
Employee Assistance Program (EAP) - Spring Health
Unlimited digital mental health access + 8 in-person counseling sessions. Telemedicine therapy included.
$3.25
210
$682.50
Wellness Platform - Virgin Pulse
Activity tracking, biometric screening coordination, HRA questionnaire, incentive management
$2.10
210
$441.00
COBRA Administration - WageWorks
COBRA notice issuance, premium collection, enrollment management for terminated employees
$1.85
210
$388.50
Compliance & Reporting (Form 5500, ACA 1094/1095, SPD)
Annual ACA reporting, plan document maintenance, legal compliance monitoring. Annualized to monthly.
$1.20
210
$252.00
TOTAL FIXED ADMINISTRATIVE COSTS THIS MONTH
$126.55/EE
210
$26,575.50
Variable Claims Payment - Actual Claims Funded This Month
Note: Claims paid = actual incurred costs. No surplus/deficit - you pay what was claimed.
Medical Claims Funded - August 2025 Paid Claims (30-day lag)
Actual claims adjudicated and paid to providers on your behalf. Breakdown in Claims Analysis tab.
$94,820.00
Pharmacy Claims Funded - August 2025 (Express Scripts)
Retail Rx + Mail Order + Specialty (Accredo) net of PBM rebates and member copays.
$38,440.00
Claims Adjustments / Recoveries
Overpayment recoveries, coordination of benefits (COB) adjustments, subrogation collections
−$2,140.00
NET VARIABLE CLAIMS FUNDED
$131,120.00
TOTAL EMPLOYER MONTHLY OBLIGATION (Fixed Admin + Net Claims)
$157,695.50
Less: Employee Contributions (Payroll Deduction Credits)
Total Employee Payroll Contributions - September
Pre-tax employee premium share collected and credited against employer obligation
−$52,290.00
NET EMPLOYER WIRE TRANSFER DUE - September 2025
$105,405.50
$750.93
Total cost per enrolled employee (gross)
$501.93
Net employer cost per EE after contributions
$126.55
Fixed admin PEPM (known, predictable)
$624.38
Variable claims PEPM (actual experience)
* In self-funded plans, the employer funds actual claims as they are paid - there is no pre-funding "pot" like in level funded. Each month the wire transfer covers (a) fixed admin costs known in advance and (b) actual claims adjudicated and paid in the prior 30 days. This creates natural monthly variability - a heavy claims month costs more; a light month costs less. Stop-loss insurance caps your maximum annual exposure. The employer owns all the variance between those extremes.