What if you could get money back from your health insurance carrier? With a traditional plan, that idea is unheard of. You pay your premium, and the insurance company keeps any surplus, even if your employees barely use their benefits. A level-funded plan flips the script. You still pay a fixed monthly amount, but a portion of it goes into a claims fund. If your team’s actual medical costs are lower than projected at the end of the year, the unused money is returned directly to your business. It’s a structure that rewards you for a healthy workforce.

Is Your Business Paying Too Much for Health Insurance?

If you run a Washington business with 20 to 100 employees, you have probably felt the sting of double-digit renewal increases. Traditional fully insured health plans lock you into a fixed premium regardless of how healthy your workforce actually is. Level-funded health insurance changes that equation, and for many Washington employers, the savings are significant. Ready to find out if a level-funded plan fits your team? Schedule a free consultation with WHIA and get a side-by-side analysis at no cost. This guide explains how level-funded plans work, how they compare to fully insured and self-funded alternatives, which carriers operate in Washington State, and what you need to consider before switching.

The Pressure of Rising Healthcare Costs

It’s no secret that the relentless rise of healthcare costs puts immense pressure on Washington businesses. Many leaders feel trapped in a cycle of steep annual renewal increases with their fully insured plans, leaving them with little control over their second-largest expense. This frustration has driven a major shift in the market. In fact, a recent study showed that 42% of businesses with fewer than 200 employees offered a level-funded plan, a huge jump from just 13% the previous year. Why the surge? Because level-funded plans offer a middle ground, blending the predictable monthly payments of traditional insurance with the cost-saving potential of self-funding. This hybrid approach gives employers a chance to manage their money better and potentially get money back when claims are lower than expected.

What Is Level-Funded Health Insurance?

A level-funded plan is a hybrid funding arrangement that sits between a traditional fully insured plan and a fully self-funded one. Each month, your business pays a fixed amount that covers three buckets:

• Claims fund: A pool set aside to pay employee medical claims as they occur.
• Stop-loss insurance: A protection layer that caps your exposure if one employee has catastrophic costs or total group claims spike unexpectedly.
• Administrative fees: Payment to the third-party administrator (TPA) that processes claims and handles compliance.

The key difference from a fully insured plan: if your group’s actual medical claims come in below what was projected, you receive a refund of the unused claims fund at the end of the plan year. According to the Kaiser Family Foundation, enrollment in level-funded plans among small businesses rose from 6% in 2018 to 38% in 2023. Washington employers are part of that trend.

How Monthly Payments Are Determined

In a level-funded plan, your monthly payment is a fixed amount calculated based on your group’s projected healthcare costs, considering factors like your team’s size and demographics. This consistency makes budgeting predictable and straightforward. The payment is then divided into three key areas. The largest portion goes into a claims fund, a dedicated account used to pay for your employees’ medical claims as they occur. Another piece pays for stop-loss insurance—a crucial safety net that protects your business from unexpectedly high claims. The final slice covers administrative fees for the third-party administrator (TPA) that manages the plan.

The real advantage of level-funding is the potential for a refund. If your team’s actual medical costs are lower than projected, the unused money in your claims fund is returned to your business at the end of the year. This creates a direct financial incentive to support your team’s well-being, as lower claims translate into tangible savings. You get the cost-containment benefits often associated with self-funding, but without the unpredictable risk. This hybrid model offers stability that fully-insured plans lack, where you pay a fixed premium no matter what. Maximizing this refund potential starts with the right plan design, which is where having expert advice becomes essential for success.

Level-Funded vs. Other Plans: A Comparison for WA Employers

Before choosing a funding model, it helps to see how the three main options stack up for businesses your size.

For Washington businesses in the 20-100 employee range, level-funded plans offer a practical middle ground. You get the budget predictability of a fully insured plan while capturing the cost-savings upside that self-funded plans have historically reserved for larger companies. Wondering which model fits your headcount and health claims history? Explore small group insurance options at WHIA or call 1.833.292.8844 for a quick 15-minute review.

How Do Level-Funded Plans Differ from Captives?

You might also hear about captives as an alternative to fully insured plans. While both level-funded plans and captives offer more control, they are structured very differently. A level-funded plan is a solution for a single employer. In contrast, captive insurance involves a group of businesses pooling their resources to form their own insurance company. With a captive, you share the risk and rewards with other member companies. This means another company’s high claims could impact your costs. Level-funded plans are often more straightforward for small to mid-sized businesses because the financial risk and potential for a refund are tied directly to your own employees’ claims experience, not an entire group of unrelated businesses.

How Washington’s Market Shapes Your Health Plan Options

Washington State has its own regulatory environment that shapes what level-funded plans can and cannot do here. Because level-funded plans are structured as self-insured arrangements and governed by ERISA rather than state law, they are partially exempt from some Washington State insurance mandates. That can reduce costs compared to a fully insured plan sold by a Washington-licensed carrier. However, employers must understand that stop-loss thresholds in Washington are subject to state-specific guidelines. Working with a broker who knows the Washington market is important when reviewing attachment points and policy structures.### Understanding Your Legal and Reporting Duties Switching to a level-funded plan gives you more control and potential savings, but it also comes with a few new administrative duties. Don’t worry—it sounds more complex than it is. Because these plans are a form of self-insurance, they are governed by a federal law called the Employee Retirement Income Security Act (ERISA). This just means there are specific legal and reporting tasks you’ll need to manage. Having a clear understanding of these responsibilities from the start ensures a smooth process, and it’s exactly what a good partner helps you handle. #### Employer Fiduciary Responsibility As an employer with a level-funded plan, you have a fiduciary responsibility. It’s a formal term for a simple concept: you must act in the best interest of your employees. The U.S. Department of Labor requires that you manage the plan prudently and make decisions solely in the interest of plan participants. This doesn’t mean you need a law degree. It simply means handling plan funds responsibly and communicating clearly and honestly with your team. A dedicated partner can help you navigate these duties, ensuring your plan is structured to protect both your company and your employees from day one. #### Government Reporting Requirements Unlike fully insured plans, level-funded plans have a federal reporting requirement under ERISA. The main task is filing a Form 5500 with the Department of Labor annually. This form gives the government a transparent look at your plan’s financial health and operations. While it’s a standard part of the process, it can be time-consuming, and missing the deadline can lead to significant penalties. This is exactly the type of administrative work you shouldn’t have to worry about. At WHIA, we handle the entire Form 5500 filing process for our clients, making sure everything is accurate and submitted on time so you can focus on your business. #### The Evolving Regulatory Landscape The rules for health insurance are always changing. New federal and state regulations can affect your responsibilities, especially with a level-funded plan. Laws like the Affordable Care Act (ACA) introduced new requirements for plan design and reporting that continue to shift. Keeping up with every update is a full-time job, and a misstep can lead to compliance issues. This is where an expert partner is essential. We constantly monitor the ever-changing healthcare landscape and proactively advise our clients on how new rules impact their plans. We help you make the right adjustments to stay compliant and ensure your benefits strategy remains effective.

Which Carriers Offer Level-Funded Plans in Washington?

Not every carrier licensed in Washington State offers a level-funded product, and those that do vary considerably in plan design, network access, stop-loss terms, and reporting capabilities. Below is an overview of carriers and arrangements commonly available to Washington employers in the 20-100 employee range.

Regence BlueCross BlueShield of Washington

Regence is one of Washington’s dominant fully insured carriers and also partners with TPA networks for level-funded arrangements. Employers gain access to Regence’s extensive provider network across the state. If your employees are spread across western and eastern Washington, network breadth matters and Regence tends to perform well here.

Premera Blue Cross

Premera is another major Washington carrier with strong provider relationships across the Puget Sound region and beyond. Premera offers both fully insured and alternative funding arrangements, and their data transparency for level-funded groups is generally strong, giving employers clear insight into claims trends.

UnitedHealthcare and Aetna (National Carriers with WA Presence)

Large national carriers often have level-funded product lines marketed to smaller employers. Their TPA infrastructure and stop-loss products can be competitive, and their networks cover employees who travel or live across state lines. The trade-off is sometimes less local carrier flexibility compared to Regence or Premera.

Independent TPAs with Stop-Loss Carriers

Some Washington employers work with an independent TPA paired with a stop-loss carrier such as Sun Life, Symetra, or Voya Financial. This arrangement gives the most flexibility in plan design and potentially the most competitive stop-loss pricing, but it requires a broker who can assemble and manage the moving parts. This is a specialty that WHIA handles for Washington clients regularly. Because WHIA is appointed with every health insurance carrier in Washington State, we can run quotes across all of these arrangements and present the top options in a simplified comparison rather than leaving you to evaluate them independently.

How Much Can Washington Employers Actually Save?

The 20-40% savings figure cited frequently in the industry is real, but it depends on your group’s claims history and overall health profile. Here is how the savings actually materialize:

Earn a Refund When Claims Are Low

If your group is healthier than projected, the unused portion of the claims fund comes back to you. A group of 50 employees that comes in 25% under projected claims could see a refund in the range of tens of thousands of dollars. That money stays with your business, not the carrier.

Save Money by Avoiding Certain State Mandates

Washington-mandated benefits add cost to fully insured plans. Level-funded plans structured under ERISA can avoid certain mandates, which lowers the base premium equivalent compared to an insured product.

Use Claims Data to Lower Future Costs

Detailed, anonymous claims reporting lets your team (and your broker) spot health trends early. If data shows high pharmaceutical costs or a specific chronic condition driving claims, you can introduce targeted wellness programs or carve-outs before the next renewal. This cycle of improvement is not available with a fully insured plan where the carrier owns the data. To put real numbers on what your group might save, the best step is a market analysis from a broker who runs quotes across all Washington carriers. Group health insurance analysis from WHIA includes a company health risk report and competitive benchmark at no cost to you.

Benefit from a Transparent Fee Structure

With a traditional fully insured plan, your premium payment goes into a carrier’s black box. You pay the same amount whether your team has a healthy year or a challenging one, and you never see where the money goes. A level-funded plan changes that by creating total transparency. Your fixed monthly payment is divided into three clear buckets: one for the claims fund, one for stop-loss insurance, and one for administration. You know exactly what you’re paying for. If your employees’ claims are lower than expected, the leftover money in the claims fund is returned to you. This structure gives you the budget stability of a fixed payment with the financial upside of a self-funded plan, all while providing the expert guidance needed to manage it effectively.

Promote Employee Wellness and See the Return

Level-funded plans give you access to detailed, anonymous claims data—something fully insured plans keep for themselves. This information is a powerful tool for improving your team’s health and your company’s bottom line. By analyzing these reports, you can spot health trends early. For example, if you see a rise in claims related to stress or musculoskeletal issues, you can implement targeted wellness programs like mindfulness resources or ergonomic assessments. This proactive approach not only helps you support your employees’ well-being but also leads to a healthier, more productive workforce and lower claims costs in the future. It’s a direct way to invest in your people and see a tangible return.

Improve Employee Retention with Better Benefits

In a competitive job market, quality health benefits are a deciding factor for top talent. Level-funded plans can give small groups the ability to offer benefits packages that rival those of much larger companies. The cost savings generated from a healthier-than-average year or exemption from certain state mandates can be reinvested directly into your benefits program. You could use that surplus to lower deductibles, reduce employee premium contributions, or add popular perks like vision and dental coverage. By offering more attractive and affordable health insurance, you not only improve employee satisfaction but also build loyalty, making it easier to keep the valuable team members you already have.

Is a Level-Funded Plan Right for Your Washington Business?

Level-funded plans tend to work best when certain conditions are met. Consider the following questions:

• Is your workforce relatively healthy? Groups with lower-than-average claims experience benefit most. If your prior year claims ran well below premium, you likely overpaid in a fully insured plan and would see a refund in a level-funded structure.
• Do you have 20 or more employees? Below 20, the actuarial risk is harder to absorb even with stop-loss, and carriers have less interest in extending level-funded terms. Above 20, the math begins to work in your favor.
• Are you paying double-digit renewal increases? If your current carrier is renewing at 10-15% annually, a level-funded plan with access to your own claims data gives you a basis to challenge those increases.
• Do you want more control over plan design? Level-funded arrangements allow more flexibility in benefit structure than fully insured plans, which means you can tailor benefits to what your employees actually use.

On the other hand, a level-funded plan may not be the best fit if your group has several high-cost claimants currently in treatment or if cash flow makes a potential shortfall in the claims fund difficult to manage. A good broker will run the numbers honestly and tell you when a fully insured plan is the better call for your situation. Not sure if your group qualifies? Talk to a WHIA benefits advisor and get an honest assessment in 15 minutes. Call 1.833.292.8844 or schedule online.### Potential Risks and Financial Considerations While the potential for refunds and lower costs is compelling, level-funded plans come with their own set of risks. Unlike a fully insured plan where the carrier assumes all the risk, a level-funded plan means your business shares in it. Understanding this trade-off is the most important part of making an informed decision. It’s not just about chasing savings; it’s about finding a funding model that aligns with your company’s financial health and risk tolerance. A clear-eyed look at the potential downsides ensures you’re prepared and can structure your plan to minimize them. #### The Risk of Higher-Than-Expected Claims The flip side of getting a refund for low claims is the potential for a deficit when claims are high. Even though they feel like fully insured plans with their fixed monthly payments, the government treats level-funded plans as self-funded, which gives employers more legal responsibilities. If the carrier’s initial projections about your group’s healthcare costs are too optimistic, you could face a significant bill at the end of the year to cover the shortfall, or a very steep renewal increase. While stop-loss insurance protects you from catastrophic individual claims and high total claims, there’s often a gap between your funded amount and where that stop-loss coverage kicks in. This is where working with an experienced broker is critical to ensure your plan is structured properly from the start. #### The Need for Financial Stability Because you are taking on more risk, your company’s financial footing needs to be solid. Before you switch to a level-funded plan, it’s wise to assess whether your business is financially stable enough to handle a potential claims spike. Ask yourself: does your company have consistent cash flow? Could you comfortably manage a one-time payment at the end of the plan year if claims run higher than expected? For many businesses, the answer is yes, and the potential savings far outweigh the risk. For others, particularly those with unpredictable revenue cycles, the stability of a fully insured plan might be a better fit for another year. An honest assessment of your financial position is the first step toward making a smart benefits decision.

Your Top Questions About Level-Funded Plans

What happens if my employees have unusually high claims in one year?

Stop-loss insurance handles this. Specific stop-loss kicks in when a single individual’s claims exceed a set threshold (often $20,000-$50,000 depending on your plan). Aggregate stop-loss activates when total group claims exceed the projected amount. Your liability is capped; the stop-loss carrier covers the excess.

How long does it take to switch to a level-funded plan?

Most transitions happen at renewal time and take roughly 60-90 days to complete from the decision point. Open enrollment, employee communications, and TPA setup all fall within that window. WHIA handles the administrative side for clients making this switch.

Will my employees notice any changes?

Employees generally see the same plan design, the same insurance cards, and the same networks they are used to. The funding change is largely invisible to them at the point of care. What may change is the benefit design itself if you choose to adjust coverage levels at the same time.

Can nonprofits use level-funded plans?

Yes. Washington nonprofits with 20+ employees qualify for level-funded arrangements through the same carriers and TPA networks available to for-profit employers. The ERISA exemption applies equally. WHIA works with a number of Washington nonprofits on level-funded plans and can provide references upon request.

See Your Potential Savings: Get a Free Analysis

WHIA works exclusively with Washington State businesses and nonprofits. Vernon Bonfield and the WHIA team have been navigating Washington’s insurance market for over 26 years, and level-funded plan analysis is a core part of what we do for every client who fits the profile. If you want to know whether level-funded health insurance would save your business money, the process is straightforward. We review your current plan, run quotes across every carrier available in Washington, and present you with a clear comparison. There is no obligation and no pressure. If your current fully insured plan is actually the best option for your group, we will tell you that too. Our advisory fee comes with a guarantee: if we cannot demonstrate at least $5,000 in savings, we refund it entirely. Take the first step: Schedule your free consultation with WHIA or call 1.833.292.8844 to speak with a Washington benefits advisor today. You can also learn more about related funding strategies we use with Washington employers:

• How stop-loss insurance protects self-funded and level-funded employers
• Transparent PBM contracts: how Washington employers cut pharmacy costs
• Group captive health insurance for Washington businesses

Key Takeaways

• Get Money Back for a Healthy Team: Level-funded plans can return money to your business if medical claims are lower than projected. Instead of the insurance carrier keeping the surplus, you receive a refund from the unused claims fund, creating a direct financial incentive to support employee wellness.
• Gain Control with Data and Transparency: These plans provide the budget stability of a fixed monthly payment while giving you access to detailed, anonymous claims data. This insight helps you understand health trends and make informed decisions to manage future costs, a level of control that fully insured plans do not offer.
• Find the Right Strategic Fit: Level-funded plans are often a great match for Washington businesses with 20 to 100 relatively healthy employees facing steep renewal increases. Because they involve financial risk, it is important to work with an expert who can analyze your claims history and determine if this model is the right move for your company.

Related Articles

• Level Funded Health Plans in Washington State Explained
• What Is a Level-Funded Health Plan?
• Level-Funded Health Plan: A Complete Guide
• Flexible Small Group Health Plan: Level vs. Self-Funded
• Employer Health Insurance Cost Per Employee: 2026 Guide