Executive Summary: The Level Funded Workforce: Who These Plans Actually Cover and Who They Miss
LFP-06.01 — The Populations#
Level funded plan design and stop loss underwriting are built on five embedded assumptions: full-time employment sustained across a plan year, a single-employer relationship, income adequate to absorb cost sharing, health status within the range the stop loss carrier priced for, and proximity to network providers. These assumptions were reasonable for the population the model was designed for. They are increasingly misaligned with the workforce that actually works for small employers in the industries where level funded has taken root.
The KFF 2025 Employer Health Benefits Survey found that 37% of covered workers at firms with 10 to 199 employees were enrolled in level funded plans. The industries with the highest penetration — construction, home health care, landscaping, food service, janitorial services — do not employ the professional services workforce the assumptions were built for. The BLS Occupational Employment and Wage Statistics for May 2024 establishes the income floor. Home health and personal care aides, the largest single occupation in the country at 4.0 million workers, earned a median annual wage of $34,900. Landscaping workers averaged $40,880. Food preparation workers averaged $33,380. Against the KFF 2024 Employer Health Benefits Survey’s average annual deductible of $2,575 for workers at firms with fewer than 200 employees, that deductible consumes 7.4% of a home health aide’s gross income — above the Commonwealth Fund’s threshold for clinical underinsurance.
Three populations emerge from this intersection. The first consists of workers whose characteristics match the design assumptions: stable, moderate-income employees in professional services and established construction companies for whom the product was built. The second consists of covered workers whose characteristics diverge from those assumptions in ways that materially degrade coverage. The Commonwealth Fund’s 2024 Biennial Health Insurance Survey found that 23% of insured adults meet the clinical definition of underinsured, 66% of them with employer coverage, and 57% of the underinsured reported forgoing needed care due to cost. The third consists of workers employed by level funded employers but excluded from coverage entirely — part-time workers below the 30-hour threshold, those who separate before completing the waiting period, and workers who decline because the family premium contribution exceeds what the household can sustain. Workers at small firms contributed an average of $7,947 annually for family coverage. In restaurants, where the National Restaurant Association reports annual turnover exceeding 70%, a 60-day waiting period structurally excludes a material share of the workforce before eligibility is even evaluated.
The pattern is not random. It maps directly to the five design assumptions, and the gap between those assumptions and the actual workforce in 2025 is the structural problem the series examines. Brokers and TPAs working in the industries where level funded is growing fastest are working with a misaligned product more often than aggregate enrollment statistics reveal.