Level-Funded Health Plans Explained: How Texas Small Businesses Get Premium Refunds (2026)

A level-funded health plan gives money back when your employees stay healthy. You pay a fixed monthly amount that budgets like a regular premium, but part of that money funds a claims account that belongs to your business. If your team's actual medical claims come in under what you funded, the surplus in that account is refunded to you, usually 60 to 90 days after the plan year ends. Refunds commonly run from 0% to 50% of the claims funding portion, and healthy Texas small businesses with 5 to 100 employees are the ones most likely to collect one. A fully-insured plan never does this: the carrier keeps every unspent dollar. This guide shows exactly how the refund works, how much comes back, and who qualifies.

How a level-funded refund actually works

Your monthly payment is split into buckets, and only one of those buckets can be refunded. At the end of the plan year, your third-party administrator runs a reconciliation: it compares the total you paid into the claims funding account against the total actually paid out for your employees' medical claims. If claims came in lower than the funded amount, the leftover is your surplus, and it comes back to you.

Here is where every dollar of your monthly payment goes:

Part of your monthly payment	What it pays for	Refundable?
Claims funding account	Your employees' actual medical and pharmacy claims up to an expected maximum	Yes. Unused dollars here are your year-end refund
Stop-loss premium	Insurance that caps your risk if claims run high	No. This is a fixed insurance cost
Administration fees	TPA services, claims processing, network access, reporting	No. This is the cost of running the plan

This structure is why a level-funded plan can give you money back while still budgeting like a fixed premium. You pay the same amount every month, so cash flow stays predictable, and the reward for a healthy claims year lands after the reconciliation.

How much money comes back

Refunds typically range from 0% to 50% of the claims funding account, depending on how far your actual claims fell below what you funded. The refund is not a guaranteed number because it depends entirely on the claims your group runs during the year. A group that stays healthy collects a meaningful check; a group that has a heavy claims year gets little or nothing back, and the stop-loss insurance absorbs the overage.

Here is what the outcomes look like across a plan year:

Claims year	What happens to the claims account	Your result
Low claims	Large surplus left unspent	A refund toward the top of the 0% to 50% range
Average claims	Some surplus left unspent	A partial refund
High claims	Account fully spent, stop-loss covers the rest	No refund, but your cost stays capped at the amount you already paid

The refund check usually arrives 60 to 90 days after the plan year closes, once the administrator finishes the reconciliation and any late claims settle. That is the same window whether you are in Corpus Christi, San Antonio, or anywhere else in Texas.

Who qualifies for a level-funded refund in Texas

Any Texas business on a level-funded plan is eligible for a refund, but the businesses that actually collect one share a profile. Because level-funded plans are medically underwritten, a healthier group is priced with a lower expected claims number and has more room to finish the year under budget.

You are a strong candidate to see money back if your business fits this profile:

• You have roughly 5 to 100 employees, the sweet spot where level-funding is offered and priced competitively.
• Your workforce is generally healthy, so claims are likely to land below the funded amount.
• You have steady, predictable staffing rather than constant turnover that disrupts underwriting.
• You want to see your claims data and reward a healthy year, not just pay a premium and move on.

Businesses that value pure budget certainty over the chance of a refund, or that have a known high-claims population, often fit a fully-insured plan better. If you are weighing the two, our level-funded vs. fully-insured comparison breaks down the trade-offs side by side.

How stop-loss insurance protects you if claims run high

Stop-loss insurance is what makes a refund possible without exposing your business to unlimited risk. It is built into every level-funded plan and caps what you can owe, so the worst case is that you simply keep the money you already budgeted. There are two layers of protection.

Type of stop-loss	What it caps	Why it matters
Specific (individual) stop-loss	The claims of any single employee or family member	One serious illness or surgery cannot blow up your whole plan
Aggregate stop-loss	The total claims of your entire group for the year	Even a bad year across the whole team stays capped at your funded amount

Because both layers are in place, your maximum cost for the year is the fixed monthly amount you already pay. The upside is the refund; the downside is capped. That asymmetry is the core reason level-funding has taken over the small-group market.

Why so many Texas small businesses are switching

Level-funded plans have moved from a niche product to the default choice for healthy small groups. According to the Kaiser Family Foundation Employer Health Benefits Survey, 37% of small firms offered a level-funded plan in 2025, up from just 7% in 2019. Industry projections have level-funded plans reaching about 40% of the under-250-employee market in 2026.

The reasons Texas owners give are consistent: the chance of a year-end refund, access to monthly claims reporting they never had on a fully-insured plan, and relief from several of the state premium taxes and ACA fees that fully-insured plans carry. For a healthy group, keeping the surplus instead of handing it to a carrier is money that stays in the business.

How to improve your odds of a year-end refund

You cannot control every claim, but you can set the plan up so a healthy year turns into a check. The businesses that consistently collect refunds do a few things well.

• Get underwritten accurately. A clean, complete health questionnaire produces a fair expected-claims number and more refund room.
• Add voluntary and preventive benefits so employees use lower-cost care instead of the emergency room.
• Review your monthly claims reports. Level-funding gives you the data; use it to spot cost drivers early.
• Shop your renewal every year with a broker who runs your numbers across multiple carriers, since expected-claims pricing varies.

A local benefits broker does this work for you at no cost, because carriers pay the broker, not you. If you want to see whether your group would likely finish the year with a refund, a Corpus Christi employee benefits broker can model it against your census before you switch.

Frequently asked questions

Do you always get a refund with a level-funded health plan?

No. You get a refund only when your group's actual claims come in below the amount you funded for the year. A healthy, low-claims year produces a refund of up to about 50% of the claims funding account. A high-claims year produces no refund, and the built-in stop-loss insurance covers the overage so your cost stays capped.

When is the level-funded refund paid?

The refund is typically paid 60 to 90 days after the plan year ends. That gap lets the third-party administrator complete the reconciliation and allows any late-arriving claims to settle before the surplus is calculated.

How much of my monthly payment can be refunded?

Only the claims funding portion of your monthly payment is refundable. The stop-loss premium and the administration fees are fixed costs and are not returned. When claims run low, the unused balance of the claims funding account comes back to you.

Is a level-funded plan the same as being self-funded?

Not quite. A level-funded plan is a packaged version of self-funding built for small businesses: you get the refund potential and claims data of self-funding, but with a fixed monthly payment and stop-loss insurance included so the risk is capped. Our guide on self-funded vs. level-funded health insurance in Texas explains the differences in full.

What size Texas business is a good fit for level-funding?

Businesses with roughly 5 to 100 employees and a generally healthy workforce are the best fit. That is the range where carriers offer level-funded plans, price them competitively, and where a healthy group has the most room to finish under budget and earn a refund.

See whether your group would get money back

Kenly Insurance Advisors is an independent, Corpus Christi based benefits brokerage that shops the whole Texas market for small businesses. We model your census against multiple level-funded carriers, show you the expected-claims math, and tell you honestly whether your group is likely to collect a refund. It costs you nothing, because carriers pay us, not you. Book a free benefits review and we will run your numbers.