Health insurance renewals can put Texas church leaders in a difficult position. You want to provide meaningful benefits for pastors and staff, but another increase in the group health premium can take money away from other parts of the church’s mission. Too often, leaders feel like the only choices are to pay the increase, reduce benefits, or stop offering coverage altogether. There may be another option.
A Level-Funded Health Plan gives the church a predictable monthly payment while allowing you to take on a portion of the medical claims risk. Stop-Loss Insurance helps protect the church from claims that exceed certain levels. For the right church, this approach can provide more visibility into healthcare spending, more flexibility in plan design, and the possibility of benefiting financially when claims perform better than expected.
Level-Funded Health Insurance is not simply a cheaper version of traditional group insurance. It is a form of self-funding. Texas church leaders need to understand how the arrangement works before making the switch.
With a traditional fully insured health plan, the church pays a premium to an insurance company each month. The insurance company then assumes the responsibility for paying covered medical claims. Whether your employees have a healthy year or a year filled with medical expenses, the church pays the agreed premium.
A Level-Funded Health Plan works differently.
The church still makes a predictable monthly payment, but that money generally covers three different parts of the plan: administration, Stop-Loss Insurance, and funding for expected employee medical claims. This means the church has a better opportunity to understand where their healthcare dollars are going. If claims come in lower than expected, some Level-Funded arrangements may return unused claim funds, apply a credit, or otherwise share part of the favorable claims experience with the employer. But church leaders should never choose a Level-Funded plan simply because someone promises a refund. You need to understand exactly what happens to unused claim dollars before you buy the plan.
Stop-Loss Insurance is what makes a Level-Funded Health Plan workable for many churches. It protects the church when medical claims exceed certain amounts. That protection can apply to one unusually large claim or to the total claims paid by the group during the year. This gives the church the ability to take advantage of a self-funded structure without being exposed to unlimited medical costs.
But the details still matter. The Stop-Loss contract determines where the church's responsibility ends and where the additional protection begins. That is why church leaders need to look beyond the monthly payment. You should evaluate a level funded plan based on the amount of risk your church retains, how the Stop-Loss coverage responds, and whether the overall structure fits the church's budget.
One frustration with traditional fully insured coverage is that the church may have limited visibility into what is driving its renewal. The premium goes up, the leadership team reviews the new rates, and the finance committee has to decide whether the church can afford it.
Level funding can provide more insight into how the plan is performing. Depending on the arrangement and size of the group, leaders receive reporting that helps the church understand overall claims performance and how much of the claims fund is being used. This information can make future benefits decisions more informed.
Instead of evaluating the health plan based only on next year's premium, the church can better understand how the plan performed and whether the current strategy still makes sense. For a finance committee trying to practice good stewardship, that additional visibility can be valuable.
Level-Funded Health Plans can also give churches more flexibility than some traditional fully insured options. Rather than simply choosing between a handful of preset plans, a church may have more opportunities to shape the benefit strategy around its employees. That could include adding tools such as telehealth, Direct Primary Care, different network strategies, or other benefits that help employees access healthcare while controlling costs.
Plan design still needs to follow the laws and requirements that apply to the specific arrangement. Church leaders should not assume that self-funding means they can simply add or remove any benefit they choose. But the added flexibility can help a church build a benefits strategy around its actual staff rather than forcing everyone into an off-the-shelf solution.
Level-Funded Health Plans give churches more control, but they also require leaders to understand the risk the church is taking on. With a fully insured plan, the insurance company assumes the claims risk. With a Level-Funded plan, the church takes on part of that responsibility. This means that church leaders need to clearly understand the risks and benefits for their particular church.
Level funding can be a smart strategy, but only when the church understands the tradeoff between potential savings and retained risk.
Level-Funded Health Insurance can be a good fit for churches with enough participating employees, a relatively stable staff, and a desire for more control over healthcare spending. The church also needs to be comfortable taking on some of the responsibility that comes with self-funding. Claims history, group health, and the terms of the Stop-Loss policy can all affect whether the plan makes financial sense.
For some churches, Level-Funded coverage will be the best option. Others may be better served by a traditional group plan, individual coverage, an HRA strategy, or a combination of other benefits that fit their budget. The goal is to find the structure that gives employees meaningful protection while keeping the church's financial commitment sustainable.
Level-Funded Health Insurance has more moving parts than a traditional group plan, so the broker you work with matters. Church leaders need a health insurance expert who can explain the claims fund, Stop-Loss coverage, administrative costs, provider network, plan design, renewal terms, and how unused claim dollars are handled. Additionally, a broker who understands how Texas churches work can help you to evaluate your total cost of risk and not just monthly premiums.
Texas church leaders deserve to work with someone who can give them a clear picture of what the plan could cost in a good year, what happens in a bad claims year, and how much financial responsibility the church is actually taking on.
Your church does not have to accept another group health renewal simply because that is what you have always done. There may be better ways to use the money your church is already spending on employee benefits.
At Insurance For Texans, our True Texas Church Insurance program helps church leaders compare traditional group coverage, Level-Funded Health Plans, individual health insurance strategies, HRAs, supplemental benefits, and other options available to Texas churches.
We start with your people and your budget.
Then we help your church’s leaders to understand the financial tradeoffs of each strategy, including what the church pays, what employees pay, and what risks the church takes on.
Level funding can be a powerful tool for the right church. But the decision should be based on more than an attractive monthly payment.
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