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Fully Funded, Self Funded, Level Funded definitions

Updated: Jun 9, 2022

Fully Funded Health Plans

You pay a monthly premium and the insurance carrier covers the risk. Well, at least most of the risk. Afterall you still will have a co-pay, deductible, out-of-pocket max, and on most plans must stay in the network. Once those stipulations are met the carrier would then pay for the medical event in full.

One trend that's been making the rounds recently in employee benefits and tech circles is the idea of 100% healthcare coverage. That is, the employer pays 100% of their employees' health plan premiums. No extra payroll deduction or other ongoing costs to worry about. Because shifting health insurance premiums from the employee to the employer doesn’t make those regular, ongoing expenses go away. It just changes who is paying them. Covering those employees 100% costs just as much in total as it would were the working and their boss splitting the bill. Someone is still paying into an insurance system that is inefficient and overpriced, and for benefits that may never end up being used by anyone.

Self Funded

The company provides funds for expected employee healthcare claims known as the "insurance pool"

This option can save employers the monthly premium of a fully funded health plan, but most of the risk is carried by the employer. And must cap at the companies discretion, which can leave the employee liable.

Level Funded

These plans attempt to combine the best of both worlds. It is less risky for the business however can be more time consuming. Basically the employer pays a carrier each month to manage its self funded plan. The insurance carrier ensures the "insurance pool" is properly funded, pays claims and performs administrative tasks.

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