Funding Models

Do you know how your health plan is funded?

Fully insured, level-funded, and self-insured plans all look similar on paper, but the economics are very different. This guide shows where risk sits, where savings go, and which model fits employer groups in the 5-250 range.

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Model Breakdown

Three ways to fund a health plan

Each model trades simplicity, control, data visibility, and risk differently. Use the tabs to compare how money flows and what employers gain or give up.

The carrier owns everything.

You pay a fixed premium every month and the carrier absorbs claims risk. The carrier controls data, retains surplus, and sets renewals across its full book.

This is operationally simple and predictable, but employers generally do not see claim-level economics or benefit directly from favorable claim years.

Pros

Fixed monthly premium
Minimal employer administration
Carrier assumes financial risk

Considerations

Limited claims transparency
No surplus return to employer
Renewals driven by carrier book

Your money, your data, your upside.

Level-funded plans keep a fixed monthly payment but split it into claims fund, stop-loss, and administration. If claims perform well, surplus is returned.

This model combines the predictability employers expect with data transparency and claim-performance upside that fully insured models do not provide.

Pros

Fixed monthly cost and predictable budgeting
Surplus return when claims are favorable
Claims transparency and better renewal logic
Stop-loss protection for catastrophic events

Considerations

Slightly more moving parts than fully insured
Requires TPA and stop-loss structure
Some employer engagement in performance review

Maximum control, maximum responsibility.

The employer pays claims directly from operating funds and typically purchases stop-loss separately. This model is common in larger organizations.

Self-insured structures can offer strong flexibility and savings but require stronger cash flow, compliance, and actuarial operating infrastructure.

Pros

Total claims and plan-design control
Full vendor strategy flexibility
No carrier premium margin layer

Considerations

Variable monthly cash exposure
Higher operational complexity
More legal, compliance, and actuarial overhead

Side by Side

How they compare

Category	Fully Insured	Level-Funded	Self-Insured
Monthly cost	Fixed premium	Fixed amount	Variable
Claims data access	Low	High	High
Surplus returned	No	Yes	N/A (stays in employer account)
Catastrophic risk protection	Carrier assumes risk	Stop-loss included	Stop-loss purchased separately
Plan design control	Carrier menu	Customizable	Total control
Pharmacy transparency	Often bundled/opaque	Pass-through options	Employer-selected PBM strategy
Best fit	Hands-off buyers	5-250 employees seeking transparency + protection	Large employers with infrastructure
Operational complexity	Low	Low-Medium	High

The Spectrum

Less control to more control

Funding strategy is a spectrum, not a binary choice. Most small and mid-size employers land in level-funded structures because they balance simplicity and control.

Least Control

Fully Insured

Simple operationally, but limited transparency and no direct upside from favorable claims years.

Carrier controls data and renewals
Predictable payment, limited flexibility
Little employer-driven optimization

Balanced

Level-Funded

Fixed monthly costs plus claims visibility, surplus return potential, and defined downside risk through stop-loss.

Predictability with transparency
Renewals tied to your group's performance
Better economics without full complexity

Most Control

Self-Insured

Maximum flexibility and ownership with higher operational and financial management requirements.

Variable monthly cash exposure
High governance and vendor complexity
Best for larger, mature benefits operations

Where Level-Funding Fits

Why most small employers land here

Employers with 5-250 employees usually want predictable budgeting and better economics without taking on a fully self-insured operating burden. Level-funded design delivers that middle ground.

Fixed Monthly PaymentBudget predictability similar to fully insured.

Real Claims TransparencyBetter insight into cost drivers and renewal planning.

Surplus Return PotentialEmployers benefit directly when claims perform well.

Stop-Loss ProtectionDefined downside against catastrophic claim volatility.

Built-In Cost ContainmentNavigation, transparent pharmacy, and direct-contracted pathways.

Common Questions

What employers ask us

Is level-funded riskier than fully insured?

Monthly costs stay fixed and stop-loss limits defined downside exposure.

Will employees notice a difference?

Member experience remains familiar while employer economics improve behind the scenes.

Can a 30-life group use this model?

Yes. Level-funded structures are commonly used in the 5-250 segment with stop-loss support.

What if we have a bad claims year?

Specific and aggregate stop-loss mechanisms are designed to activate when claims exceed expected thresholds.

How much can we save?

Savings vary by profile, but many employers see meaningful reductions from better pharmacy and renewal mechanics.

Do we really retain 100% of our unused claims funds?

Yes. When claims come in under budget, unused claims funds are returned to the employer based on the plan terms.

See how a level-funded plan compares for your group.

We can model your current fully insured spend against a level-funded alternative side by side so decision-makers can compare risk, visibility, and savings clearly.

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