Level Funded vs. Self Funded Health Plans: A Practical Guide for Employers

Title card for

Rising healthcare costs have pushed many employers to explore alternatives beyond traditional fully insured plans. Among the most common options today are level funded vs self funded health plans. While both models give employers more control than fully insured coverage, they operate differently and carry different levels of financial responsibility.


If you’re evaluating self funded vs level funded options for the first time, this guide breaks down how each model works, who they’re best suited for, and what you should consider before making the switch.


Why Employers Are Exploring New Funding Models


Healthcare premiums continue to rise, and fully insured plans offer little room for flexibility or cost containment. This has led many companies to compare fully insured vs self insured vs level funded models as a way to gain more transparency and control.


The good news? Employers have more viable options than ever, and understanding the differences can help you choose a plan that supports both your financial goals and your employees’ needs.


What Is a Level-Funded Health Plan?


A level-funded plan is often described as a “bridge” between fully insured and self funded coverage. Employers pay a fixed monthly amount (the “level” payment) that covers:


  • Claims funding

  • Administrative fees

  • Stop-loss insurance

At the end of the year, if claims are lower than expected, the employer may receive a refund or credit. If claims run high, stop-loss protection limits financial risk.


Best for:


  • Small to mid-sized employers

  • Companies seeking predictable monthly billing

  • Organizations not yet ready for the full responsibility of self funding

Level-funded plans offer many of the advantages of self-funding, transparency, access to claims data, and potential savings, without exposing employers to large swings in monthly expenses.


What Is a Self-Funded Health Plan?


A self funded health plan (or self insured plan) shifts the responsibility of paying claims directly to the employer. Instead of paying fixed premiums, employers pay claims as they occur and purchase stop-loss insurance to protect against large, unexpected costs.


Self funding offers:


  • Maximum plan customization

  • Full visibility into claims and cost drivers

  • Opportunity for long-term savings

  • Greater flexibility in plan design and vendor selection

Best for:


  • Mid-sized and large employers

  • Organizations with predictable population health

  • Employers ready to take a more active role in benefits management

For companies willing to invest in analytics, care navigation, and risk management, level funded vs self funded healthcare often points to self funding as the more strategic long-term option.


Level Funded vs Self Funded: Key Differences


Here’s a simple way to compare the two models:


1. Financial Risk


  • Level Funded: Limited. Stop-loss is bundled, and monthly payments are fixed.

  • Self Funded: Higher. Employers fund claims directly but can control risk with stop-loss coverage.

2. Cash Flow


  • Level Funded: Predictable and fixed.

  • Self Funded: Variable, depending on claims activity.

3. Claims Transparency


  • Level Funded: Partial, depending on carrier reporting.

  • Self Funded: Full access to real-time claims data.

4. Potential Savings


  • Level Funded: Moderate savings potential.

  • Self Funded: Highest long-term savings when managed strategically.

5. Flexibility


  • Level Funded: Some customization but still guided by the plan administrator.

  • Self Funded: Extensive flexibility across vendors, plan design, and care strategy.

6. Who It’s Best For


  • Level Funded: Employers wanting stability with upside potential.

  • Self Funded: Employers seeking control and long-term cost management.

Fully Insured vs Self Insured vs Level Funded


To put it all in perspective:


  • Fully Insured: Easiest but most expensive and least transparent.

  • Level Funded: Middle ground with fixed payments plus savings potential.

  • Self Funded: Most control, highest flexibility, best for long-term cost strategy.

Employers often start with level funding and graduate into self funding as they gain comfort with claims data and risk management.


How to Choose Between Level Funded and Self Funded Plans


When evaluating level funded vs self funded, consider:


1. Risk Tolerance

Is your organization comfortable with variable monthly claims? If not, level funding may be a better fit.


2. Workforce Stability

Predictable population health supports self funding. Rapidly changing workforces may benefit from level-funded predictability.


3. Use of Data

Organizations that actively leverage claims insights often succeed with self funding.


4. Long-Term Strategy

If your goal is to build a sustainable, transparent benefits model, self funding offers more opportunities.


5. Administrative Support

Self funding requires stronger vendor management and internal leadership alignment.


A Practical Way Forward


No single model is right for every employer. Level funding works well for those who want predictability and better visibility. Self funding is ideal for organizations ready to take a more strategic, data-driven approach.

Either way, the goal is the same: a benefits plan that balances cost control, employee experience, and long-term sustainability.


Final Thoughts



Choosing between level-funded vs self-funded health plans isn’t just a technical decision. It’s a strategic one that affects financial performance, employee well-being, and organizational resilience.

If you’re looking to make your benefits strategy more data-driven, Health Compiler helps employers turn claims and clinical data into clear insights, cost trends, and better decisions, no complexity, no disruption, and no technical lift.

Because the right health plan starts with the right information.