What if your healthy years actually paid off?
With a fully insured plan, your premium is the same whether your team barely visits the doctor or has a rough year — the insurer keeps the difference either way. Level-funded and self-funded plans work differently: when claims come in lower than expected, that savings can come back to you.
Level-Funded vs. Self-Funded
Both are alternatives to a traditional fully insured plan — the right one usually comes down to your group size and cash flow stability.
Level-Funded Plans
- Typical group size fitSmall to midsize employers
- Monthly paymentFixed, like fully insured
- Lower-than-expected claimsSurplus refund potential
Self-Funded Plans
- Typical group size fit50–100+ employees
- Payment structurePay claims as incurred
- State premium taxGenerally exempt (ERISA)
What's Actually Inside That Monthly Payment
Whether level-funded or self-funded, your costs generally break into three pieces.
The estimated cost of your team’s expected medical claims for the year, based on your group’s history and demographics.
Insurance that protects your business if an individual claim, or your group’s total claims, exceed a set dollar threshold.
The cost of a third-party administrator handling claims processing, customer service, and day-to-day plan management.
With a fully insured plan, all three of these are bundled into a premium you never see broken out — and the insurer keeps any surplus. With level-funded and self-funded arrangements, you see exactly what you’re paying for, and any surplus stays with you.
Which Structure Tends to Fit Which Business
Under ~50 Employees
Level-funded is often the sweet spot — predictable payments with upside potential, without carrying the full risk of self-funding on a smaller, less predictable claims pool.
50–100+ Employees, Stable Cash Flow
Self-funded tends to make the most sense here — a larger group means more predictable claims patterns, and stable cash flow can absorb month-to-month variation.
Tight Cash Flow or High Claims Volatility
A fully insured plan — or a level-funded plan with a conservative stop-loss threshold — may be the more stable choice until your group’s claims history is more established.
Level-Funded & Self-Funded, Quickly Explained
What happens if our claims are unexpectedly high?
Stop-loss insurance is built into both structures specifically for this. It caps your exposure at a set dollar amount — per employee, for the whole group, or both — so one bad year doesn’t jeopardize your business.
Do we lose any ACA protections by switching?
No. Level-funded and self-funded plans still must comply with major ACA requirements like essential health benefits and preventive care coverage — what changes is how the plan is financed and regulated, not the coverage floor your employees are guaranteed.
Is a self-funded plan riskier than staying fully insured?
Not with proper stop-loss coverage in place, which is standard on every plan we set up. The trade-off is more month-to-month variability in exchange for keeping the savings when claims run low — not unlimited financial exposure.
Can we switch from fully insured mid-year?
Typically these transitions happen at renewal, so we’d plan the switch to align with your current plan’s end date rather than disrupting coverage mid-year.
Let's see if a different structure could work for you
We’ll model your group against both options, free, so you can see real numbers before deciding.