Get the Whole Picture on Level Funding: Look at The Advantages and Limitations

Published on April 29, 2026

As plan sponsors and benefit consultants consider ways to reduce costs and gain flexibility for their health care benefits, the concept of level funding the prescription benefit is getting more attention. There are some advantages to level funding, as well as limitations, but a deeper dive also shows other funding arrangements may be better.

Level Funding Advantages

Level funding is a hybrid funding model that mixes elements of self-funding and may also include stop-loss protection. It features a fixed monthly cost billed to the plan sponsor, with total costs reconciled against actual claims at the end of the contract year. This funding arrangement can offer advantages over fully insured plans, such as the potential for refunds based on positive performance (at the PBM’s discretion) and benefit design flexibility. Conversely, this funding arrangement may offer some level of risk protection as an advantage over self-funding.

Level Funding Limitations

Level funding may include stop-loss insurance—either individual incident stop loss (per claim or per covered life), aggregate stop loss, or both—which help share the risk with the plan sponsor. This arrangement comes with several considerations that warrant careful evaluation:

If claims exceed the carrier’s stop loss liability at any point during the contract year, the plan sponsor will be 100% responsible for these additional costs, which would be beyond the fixed monthly costs they paid in that given contract year.
In some instances, the stop-loss carrier could impose limitations, such as adding an individualized high-cost deductible to the specific individual at risk or not covering the high-cost drug and leaving the plan sponsor with the financial risk to pay for it, referred to as lasering.
If an adverse market event occurs, the PBM can increase the level-funded rates at any time in that given contract year or terminate the agreement with 30 days’ notice.
Reconciliation occurs six months after the end of the contract year to settle any differences in payments.

A Level Funding Alternative That Covers 100% of the Risk & Has A Proven Track Record

When it comes to guaranteeing the Rx benefit and taking on 100% of the risk, Benecard’s guaranteed cost, fixed rate program takes any potential concerns off the table by providing absolute budget predictability and returning 100% savings back to the plan sponsor. With a reliable and proven track record of working with public sector entities for nearly 40 years, our program offers:

A fully guaranteed funding model, with no reconciliation or risk beyond the fixed monthly program charges (regardless of how high claims may rise), all underwritten specifically to the plan sponsor’s defined pharmacy benefit plan.
No additional invoices for administration fees or clinical program fees, such as those for prior authorizations.
100% return of savings delivered back to the plan sponsor based on positive plan performance.
Plan sponsors retain full autonomy of their benefits, without any lasering.
Comprehensive clinical programs included as part of the standard program offering, at no additional charge.

With high trends in the industry along with more cost uncertainty, an offering that provides peace of mind without administration headaches, 100% return of savings for positive plan performance, monthly fixed program charges for budget predictability, and full plan sponsor control, is a strong alternative to the typical level funded or self-funded with back end stop loss models. Of course, we offer other funding arrangements to meet your needs.

If you would like to discuss more about how Benecard can help assist with 100% risk protection, budget predictability, plan design flexibility, and a return of savings offering, please reach out to us at talktous@benecard.com.