For nonprofit leaders, every dollar has a purpose. Budgets are often tied to grants, donations, program goals, staffing needs, and long-term mission priorities. In fact, PHP currently partners with more than 80 nonprofit organizations representing more than 5,000 members, giving us first-hand insight into the benefits challenges mission-driven employers face every day.
When health plan costs rise year after year, it can put pressure on more than the benefits budget. It can affect hiring, retention, employee satisfaction, and the organization’s ability to serve the community.
That is why more nonprofit organizations are taking a closer look at how their health plan is funded.
For many, a level-funded health plan may offer a practical middle ground. It can provide more visibility and control than a traditional fully insured plan, while still offering more predictability than a self-funded arrangement.
What is a level-funded health plan?
A level-funded health plan is a type of health plan funding arrangement that combines elements of fully insured and self-funded coverage.
With a traditional fully insured plan, an employer pays a fixed monthly premium to the insurance carrier. The carrier takes on the claims risk, but the employer usually has limited visibility into how claims are performing or what is driving future increases.
With a level-funded health plan, the employer still pays a predictable monthly amount. That payment typically includes estimated claims costs, administrative fees, and stop-loss protection, which helps protect the organization from unusually high claims. If claims are lower than expected, the employer may be eligible for a surplus refund or credit, depending on how the plan is structured.
In simple terms, level funding can give employers a clearer view into their healthcare spending without requiring them to take on the full financial exposure of traditional self-funding.
Why healthcare cost control matters for nonprofits
For nonprofits, healthcare costs are not just another business expense. They are directly connected to the organization’s ability to plan responsibly, support employees, and protect resources for the mission.
Many nonprofit leaders are trying to balance several competing priorities:
- Offering competitive benefits to attract and retain employees
- Managing limited or fixed budgets
- Responding to rising healthcare costs
- Supporting employee well-being
- Protecting dollars that fund programs and services
That balancing act can be especially difficult when the organization has limited insight into why costs are rising.
A renewal increase may show up once a year, but the story behind that increase is not always clear. Leaders may wonder:
- Are costs being driven by high claims?
- Are employees using care appropriately?
- Are pharmacy costs increasing?
- Are there opportunities to improve preventive care or chronic condition support?
- Is the organization paying more than it needs to?
Without meaningful data, it can be difficult to answer those questions.
How level-funded health plans can help nonprofits control healthcare costs
Level-funded health plans are not the right fit for every nonprofit. But for organizations looking for greater transparency and more informed decision-making, they can offer several important advantages.
1. More predictable monthly costs
Nonprofits need budget stability. A surprise increase or unpredictable monthly expense can make planning difficult, especially for organizations working within grant cycles, donor commitments, or board-approved budgets.
Level-funded health plans are designed to provide consistent monthly payments during the plan year. That helps employers plan for healthcare expenses more confidently while still gaining access to more information about plan performance.
This predictability is one reason level funding can appeal to nonprofits that want more control but are not ready to move into a self-funded model.
2. Greater visibility into claims and cost drivers
One of the biggest frustrations with traditional fully insured plans is limited transparency. Employers may receive a renewal increase but have little information about what is driving it.
Level-funded arrangements often provide more reporting on claims costs, utilization, and plan performance. This can help employers better understand how healthcare dollars are being used and where opportunities may exist to manage costs more effectively.
For nonprofit decision-makers, this kind of visibility matters. It can support better conversations with leadership, finance committees, boards, brokers, and employees.
Instead of simply reacting to renewals, nonprofit leaders can begin asking more strategic questions:
- What trends are affecting our plan?
- Where are employees seeking care?
- Are there gaps in preventive care?
- How are pharmacy costs affecting overall spend?
- What can we do now to support better outcomes later?
The goal is not to overwhelm leaders with data. The goal is to give them enough information to make more confident, informed decisions.
3. Potential surplus opportunities
In a fully insured arrangement, an employer typically does not directly benefit from favorable claims experience when claims are lower than expected.
With many level-funded health plans, if claims run lower than projected, the employer may have the opportunity to receive a surplus refund or credit, depending on the plan structure and applicable requirements.
For nonprofits, that potential matters.
A surplus opportunity could help an organization reinvest in employee benefits, strengthen reserves, support wellness initiatives, or free up dollars for other mission-focused priorities.
It is important to note that surplus rules vary by plan. Nonprofit leaders should work closely with their broker, advisor, or health plan partner to understand how surplus calculations work, when funds may be returned, and what limitations may apply.
4. Protection from large claims
One common concern about level funding is risk.
That concern is valid. Nonprofit leaders have a responsibility to protect the organization financially. Taking on unnecessary risk could affect employees, programs, and long-term stability.
Level-funded health plans typically include stop-loss coverage, which helps protect the employer from unexpectedly high claims. This is one of the key features that makes level funding different from traditional self-funding.
That protection can help nonprofits explore a more transparent funding model while maintaining defined limits around financial exposure.
In other words, level funding is not about taking on risk blindly. It is about understanding the tradeoffs and deciding whether the added visibility and control are worth exploring.
Is a level-funded health plan right for every nonprofit?
Not necessarily.
A level-funded health plan may be a good fit for nonprofit organizations that want:
- More insight into healthcare spending
- Predictable monthly costs
- A better understanding of claims trends
- The potential to benefit from favorable claims performance
- A measured step toward greater cost control
However, it may not be the best fit for every organization. Factors such as group size, claims history, employee health needs, budget tolerance, and long-term strategy should all be considered.
That is why the conversation should not start with, “Which plan is cheapest?”
A better question is:
“Which funding model gives our organization the right balance of predictability, transparency, and control?”
For some nonprofits, the answer may still be fully insured coverage. For others, level funding might be the next logical step.
What should nonprofit leaders ask before choosing a level-funded health plan
Before moving forward with a level-funded health plan, nonprofit decision-makers should ask clear, practical questions.
Key questions to consider:
- What is included in the monthly payment?
- How are claims, administrative fees, and stop-loss coverage structured?
- What reporting will we receive?
- How often will we see claims or utilization data?
- How is any surplus calculated?
- Are surplus dollars returned, credited, or shared?
- What happens if claims are higher than expected?
- What support will we receive in understanding the data?
- How will this funding model affect employees?
- How does this fit into our long-term benefits strategy?
These questions can help nonprofit leaders move beyond surface-level comparisons and better understand whether level funding aligns with their organization’s goals.
A practical step toward greater cost control
Healthcare costs are likely to remain a significant challenge for nonprofit organizations. But nonprofit leaders do not have to accept limited visibility as the only option.
For organizations that want more insight into healthcare spending, more predictable monthly costs, and a stronger role in managing long-term benefits strategy, a level-funded health plan may be worth considering.
Level funding is not about chasing the lowest price. It is about creating a clearer path forward.
For many nonprofits, that means gaining the information, structure, and support needed to make smarter healthcare decisions while continuing to invest in the people who carry out the mission every day.
How PHP's LEVEL Solutions supports nonprofits
As a not-for-profit health plan, PHP understands the unique challenges nonprofit organizations face. Every healthcare dollar matters, and benefit decisions can directly impact an organization's ability to fulfill its mission.
That's why PHP offers LEVEL Solutions, a level-funded health plan option designed to help employers achieve a balance of cost control, budget predictability, and greater visibility into healthcare spending. With built-in financial safeguards, customizable plan designs, and access to meaningful claims insights, LEVEL Solutions can help nonprofits make informed decisions about their employee benefits strategy.
PHP currently serves more than 80 nonprofit organizations covering more than 5,000 members, with experience supporting groups ranging from 5 employees to more than 2,000 employees.
Our nonprofit clients include social service agencies, educational and youth-focused organizations, charitable foundations, and community development organizations throughout the region.
As a locally based company, PHP is committed to supporting the communities we serve. Our team members actively support nonprofit organizations through board service, volunteerism, and partnerships with community organizations dedicated to improving health and wellness outcomes.
Ready to Learn More?
Start by talking with your benefits advisor about whether a level-funded health plan is right for your organization.
PHP can help you evaluate your options and determine if LEVEL Solutions aligns with your goals, budget, and workforce needs.
Call our sales team: 260-432-6690
Visit our website to explore plan options
