Level-Funded Plans: What They Are and Why Colorado Employers Are Switching

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What Are Level-Funded Plans?

Level-funded health plans are a hybrid between fully insured and self-funded insurance. Employers pay a set monthly amount (“level” funding) that covers three main areas:

  1. Fixed Costs – Administrative fees, stop-loss insurance, and plan management.
  2. Claims Fund – Money set aside to pay employee health claims.
  3. Reserves – A cushion for unexpected high claims, often protected by stop-loss coverage.

If claims come in lower than expected, employers may receive a refund or credit at renewal. If claims are higher, stop-loss insurance helps cover the difference.

Why Employers in Colorado Are Switching

In today’s competitive job market, employers are looking for ways to balance benefit costs while still offering attractive health plans. Level-funded arrangements are gaining traction across Colorado for several reasons:

1. Cost Predictability

Employers know exactly what they’ll pay each month, similar to a fully insured plan. This makes budgeting easier, especially for small and mid-sized businesses.

2. Potential for Savings

Unlike traditional fully insured plans, unused claim dollars may be returned to the employer. That means businesses can benefit directly when claims run lower than expected.

3. Transparency

Level-funded plans often include detailed reporting. Employers can see where healthcare dollars are going, which helps them make smarter decisions about wellness programs and employee support.

 

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4. Flexibility in Plan Design

Employers can tailor benefits to meet the needs of their workforce—something that can help attract and retain talent in Colorado’s competitive industries, from tech and healthcare to construction and hospitality.

5. Rising Healthcare Costs

With premiums increasing year after year, level-funded plans provide an alternative path that can help control costs without sacrificing quality coverage.

Important Considerations

Level-funded plans are not the right fit for every business. Factors like company size, claims history, and risk tolerance all play a role in determining whether this option is a good match. Employers should carefully review plan details with a licensed insurance advisor before making a decision.

The Bottom Line

Colorado businesses are increasingly drawn to level-funded health plans because they offer predictability, cost savings potential, and more control. For employers who want a middle ground between fully insured and self-funded coverage, level-funded plans may be worth exploring.

At Conexus Insurance Partners, we help Colorado employers evaluate their options so they can offer competitive, sustainable benefits that align with their budget and their people-first values.

👉 Interested in exploring whether a level-funded plan could work for your business? Contact a Conexus advisor today to learn more.

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