The short version
- Level funding is a self-funded arrangement with stop-loss protection, subject to the contracts.
- Ask for claim timing, termination and refund terms in writing.
- A fixed monthly payment does not explain every possible employer obligation.
1. Who owes the benefits, and who does stop-loss insure?
Ask for the plan document, administration agreement, stop-loss policy and final underwriting terms. Identify the entity responsible for employee benefits and the insurer responsible for reimbursing eligible losses. A network name on an ID card does not answer either question.
Federal guidance describes level-funded arrangements as self-funded expected claims combined with stop-loss insurance. Washington law defines qualifying group stop-loss protection as insuring the employer, sponsor or plan, with payments made to them rather than participants or providers. Source: CMS, pages 183–184; RCW 48.21.015.
2. What is our maximum obligation, in dollars?
Request a written annual funding schedule separating claims funding, administration, stop-loss premium and other charges. Have the provider identify which amounts are fixed, which change with enrollment and what could be payable beyond the regular invoice.
Ask how the individual and aggregate attachment points work, including any individual exceptions. These are stop-loss thresholds, not employees' deductibles. Washington's statutory definition includes a minimum aggregate attachment point of 120% of expected claims; that provision alone does not establish your total annual liability. The policy and other agreements must explain the complete obligation. Source: RCW 48.21.015.
3. Do the health plan and stop-loss terms fit together?
Request an explanation of how the benefits promised to employees align with losses eligible for stop-loss reimbursement. Ask about exclusions, definitions, amendments and disclosure obligations. If the plan pays a benefit the stop-loss policy does not reimburse, who funds it?
Have the administrator explain the process for approving a plan amendment or discretionary claim payment. Do not assume that a vendor's ability to process a payment means the insurer must reimburse it. Keep the final documents and the written explanation together, with someone responsible for reviewing changes at renewal.
4. What happens to claims paid after the year ends?
Ask the administrator to walk through a December medical service that is billed in January and paid in February. Which plan year handles it? Does the stop-loss policy cover it? What submission and payment deadlines apply?
Then repeat the example assuming you terminate the arrangement on December 31. Ask whether additional claim funding, extended payment coverage or administration charges would be needed. Terms such as incurred, paid and run-out describe different parts of this process. Request a dated transition example rather than relying on the assurance that the plan includes protection.
5. How is a surplus calculated and returned?
A possible return of unused claims funding should be described as conditional. Ask for the formula, the employer's share, any retained amount and the date a payment could become available. Confirm whether renewing, remaining with an administrator or waiting for outstanding claims affects eligibility.
Request three written illustrations: claims below expectations, claims at expectations and claims above expectations. Keep the possible refund outside your operating budget until the contractual conditions are satisfied. The comparison should still make sense if no surplus is returned. Ask how employee contributions are handled when any refund becomes available.
6. What can change at renewal, and how do we leave?
A first-year quote does not establish the next year's pricing. Ask what information is considered at renewal, when terms will be issued and whether the next stop-loss contract could change individual or aggregate protection. Review cancellation notice requirements, final reconciliation and data access before signing.
Make the exit scenario concrete: if the business returns to fully insured coverage, who finishes pending claims, who answers employee appeals and what fees remain? Also ask how additions, terminations and dependent changes affect monthly funding. Put these answers into a transition checklist with named contacts.
7. Which duties does each vendor perform?
Create a responsibility list for enrollment, claims, appeals, plan documents, notices, reporting and privacy. Identify who completes each task, who supplies information, the fee and the deadline. Request evidence of completion where reporting obligations apply.
Vendor support does not automatically remove the employer plan's responsibilities. For example, federal transparency rules explain that level-funded plans can contract for disclosures while retaining responsibility for compliance and monitoring the service. Do not extrapolate one vendor's marketing promise to every legal duty. Source: CMS, pages 183–184.
Build a decision file before the signature
Keep a short packet containing the final quote, contracts, answers to these questions and a comparison with your fully insured renewal. Include provider access and prescription benefits so the funding discussion does not crowd out employee coverage.
Level funding may deserve serious consideration when the group qualifies and the business understands its obligations. It also requires a deliberate decision about cash flow, administration and contract risk. The Washington OIC stop-loss overview provides the basic distinction between employer protection and employee health coverage.
Ask Benefit Experts for a proposal review. Bring the actual contracts and renewal, including attachments and final underwriting terms. Ask for a written explanation of compensation and any administration fees before making the comparison.
Common employer benefits questions
Does stop-loss insurance pay employees' medical bills directly?
Under Washington's statutory group stop-loss definition, it insures and pays the employer, sponsor or plan. The health plan's benefit and claims arrangements are separate.
Is a level-funded refund guaranteed?
No. Any refund depends on actual experience and the contract's calculation, timing and eligibility requirements. Request the conditions in writing.
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