Level-funded health insurance is one where the employer pays a set amount of money each month into its own claims fund. The amount it pays into the fund is based on an estimate of how much money the employer is likely to have to pay out in claims.

Level funding is a contract that the industry/legislatures came up with that allows employers to be exempt from many aspects of the Affordable Care Act. These contracts are not fully insured by legal definition.

Level-Funded plans are exempt from 3 burdensome (and in some cases costly) provisions of ACA:

1. The Essential Benefits Provisions: 10 classes of coverages that must be covered to a specific legislated formula according to the ACA. 
2. The ability to apply medical underwriting of the employee population to the rating establishment process. One size fits all pricing helps the sicker groups by undervaluing their required premium contribution to the pool; but penalizes healthier groups by making them pay a rate that makes them very profitable individually.     
3. Removing the metallic grading or “actuarial equivalency”, this requirement establishes all plans must meet stringent government defined out of pocket plan requirements according to 4 specific metallic bands.  This results with fewer plan options available and cookie cutter plans designs of the plans that are available.