Under ERISA guidelines (Employee Retirement Income Security Act of 1974), a level-funded plan breaks monthly payments into three internal buckets to capture the traits of each plan type:

Fully Funded Experience
Employers pay one fixed, predictable payment each month, just like a fully insured plan, so budgeting is simple because monthly costs never fluctuate, regardless of how many employees go to the doctor that month.

Self-Funded Core
Behind the scenes, a large portion of that monthly payment is deposited into a claims reserve account. When employees file medical claims, they are paid directly out of that pool of money. If the pool has money left over at the end of the year because employees stayed healthy, the employer receives a refund or credit.

Level-Funded Wrapper
The third bucket of the monthly payment buys built-in "stop-loss" insurance. This insurance acts as a ceiling. If employee medical claims skyrocket and completely empty the claims account, the stop-loss policy steps in immediately to pay the rest. This keeps the employer's costs perfectly "level".

Fully Funded ERISA Plan

(SELF-FUNDED / LEVEL FUNDED)