A level-funded health plan is a type of group insurance that blends the stability of a fully insured plan with the cost-saving potential of a self-funded model. It’s quickly becoming one of the most popular options for small and mid-sized businesses in Arizona looking to lower their healthcare costs—without taking on too much financial risk.
With a level-funded plan, your business pays a fixed monthly amount that covers:
If your team stays healthy and uses less care than expected, you may be eligible for a refund at the end of the plan year. If claims are high, your stop-loss insurance kicks in—so your financial exposure stays capped.
In short: level-funded plans let you save money if your employees are healthy, but they won’t put your business at risk if someone needs costly care.
Level-funded plans are designed to give employers more control over healthcare costs—without taking on the unpredictable risk of fully self-insuring.
Your monthly payment is split into three predictable components:
These cover your plan’s setup, claims management, compliance, and member support.
This is a pool of money set aside to pay for your employees’ actual medical expenses throughout the year.
This protects your business if claims exceed expected levels, acting as a safety net for high-cost events.
Monthly Cost |
Risk to Employer |
Potential Refund |
Underwriting |
Best For |
Fixed premium |
Low |
No |
Guaranteed issue |
All business sizes |
Fixed monthly cost |
Moderate (capped) |
Yes, if claims are low |
Health questionnaire |
Healthy small/mid-sized |
Varies month to month |
High |
Yes, if managed well |
Often complex |
Large groups |
More Arizona businesses are switching to level-funded plans because:
In short: You pay a set amount monthly, gain access to detailed reporting, and if your claims stay low—you may get money back.
Level-funded plans follow the same core structure nationwide, but the specifics—such as available carriers, underwriting requirements, and refund policies—can vary by state. Here’s how these plans typically operate in Arizona:
Each month, your business pays a fixed amount that includes:
If actual claims come in under budget, you may be eligible for a refund—usually 50% to 100% of the unused claims fund, depending on the carrier.
Level-funded plans are not guaranteed issue, which means you’ll go through basic underwriting. This often involves:
Arizona carriers typically offer a 24–48 hour turnaround for quotes once underwriting data is submitted.
Some of the top insurers offering level-funded plans in Arizona include:
Each carrier has its own rules for minimum group size, refund eligibility, and underwriting, so working with a broker ensures you’re matched with the right fit.
Level-funded plans offer real cost advantages for Arizona businesses—but like any option, they aren’t for everyone. Here’s a breakdown of the biggest benefits and potential drawbacks.
If your employees are generally healthy and don’t use much healthcare, you could save significantly compared to fully insured plans.
If claims are lower than expected, a portion of your unused claims fund is returned to you at the end of the year. This turns good health into direct savings.
Unlike traditional plans, level-funded options give you access to anonymized reporting that shows where your healthcare dollars are going.
You can tailor your plan design more easily—whether that’s adding telemedicine, structuring deductibles creatively, or adjusting copays.
Unlike fully insured plans, level-funded options require basic underwriting. This could affect eligibility if your group has significant health risks.
If your group has high medical usage or poor claims history, level-funded premiums may be similar—or even higher—than traditional insurance.
Level-funded plans can offer major cost advantages—but they’re not the right fit for every company. Here’s how to know if this model makes sense for you.
If level-funded insurance isn’t the right fit, Arizona businesses still have great options:
Not sure where you fall? We’ll help you compare all three approaches—side by side.
Yes. Most level-funded plans include a claims fund refund provision. If your team’s actual claims are lower than projected, a portion (often 50–100%) of the unused claims fund is returned to you at year’s end.
Be sure to check each carrier’s refund rules—some pay annually, others apply it to future premiums.
Not in the same way you might with full self-funding. With stop-loss insurance included, your financial exposure is capped. Even in a high-claim year, you won’t pay more than your fixed monthly amount.
Most carriers in Arizona offer level-funded plans for groups as small as 3 enrolled employees. Some may require 5+. Larger groups (20+) often see the most savings, but small groups can still benefit.
Yes. Most level-funded plans are fully ACA compliant, meaning they meet essential health benefit requirements, cover preventive care, and comply with reporting mandates.
Absolutely. If you select a high-deductible level-funded plan that meets IRS guidelines, your employees can use Health Savings Accounts (HSAs) to pay for qualified medical expenses with pre-tax dollars.
Still have questions? Contact us and we’ll get you a personalized answer.
Wondering whether a level-funded plan could save your business money? Our team at AZ Health Insurance Agents will help you run the numbers, compare plans, and understand exactly how this model fits into your benefits strategy.
We’ve helped employers across Phoenix, Scottsdale, Gilbert, and beyond:
Ready to explore your options? Request a quote or speak with a licensed Arizona broker today.
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At AZ Health Insurance Agents, we understand that your health is your most valuable asset, and we are dedicated to ensuring that you and your loved ones have access to the best healthcare options in Arizona.
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