Level Funding Health Insurance Case Study: The Lewer Companies

At The Lewer Companies, we faced a dilemma in 2018. Our health insurance rates with a fully insured plan kept escalating year-over-year without knowing why, and our deductibles continued to increase, leaving our employees with more out-of-pocket risk. As a privately held business, we struggled to manage these costs, plus keep employees and their dependents enrolled in the plan.

The insurance company providing our plan was not transparent, and our plan rates and employee deductible risk share were not sustainable. Something had to change.

At the time, The Lewer Companies averaged 40% participation in the plan. Looking at our workforce, we thought we had a diverse demographic mix of ages and an almost equal number of men and women. Based on these demographics, plus other factors, executive leadership decided to switch carriers and enroll in a level-funded plan.

Level funding is a type of medical self-insurance, but with safeguards, built-in to protect a business. As the name suggests, the employer pays a fixed or leveled monthly premium to fund the staff’s health coverage. The level-funded insurance premium comprises three elements:

  • The maximum amount of expected claims
  • A third-party administrator (TPA) fee
  • A stop-loss insurance premium

In contrast to fully insured plans where an employer is kept in the dark about claims, level funding allows for monthly reports so a business owner can see the quantity and amount of claims. The business will receive a benefits refund if claims experience is better than expectations at year’s end. But, if claims exceed an underwritten amount, stop-loss insurance will kick in and protect the company from the event of a catastrophic claim.

For The Lewer Companies, moving to a level-funded plan proved beneficial.


Rates stabilized after years of substantial and unexplained increases. Participation also increased from 40% to 70%. In 2020, Lewer ended the year with a claims surplus.

Under the terms of our benefits contract, we split the amount with our benefits provider as an administrative fee, leaving the balance to apply to the administrative fee for this year which should help hold down rates.

Operating a level-funded health plan requires consideration of your company’s cash flow, risk tolerance, employee enrollment, and preferred budgeting methods

  • The business owner shares the risk and pays the claims up to the point stop-loss insurance kicks in. This may affect the company’s cash flow during the year.
  • Very few companies want to adjudicate their claims, so a TPA is highly recommended to handle this expense.

Level funding may be suitable for a business that wants to access claims data while paying a consistent premium each month. Like The Lewer Companies, employers who understand their employee demographics and emphasize wellness education may save with a level funding benefits strategy. If your workforce is healthy overall, it can make sense (and cents) to switch to a level-funding plan.

We invite you to contact us, and we will gladly share more of our story. We will also consult with you at no charge to see if a level-funded plan is right for you.

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