Choosing how your health plan is funded affects cost predictability, flexibility, and financial risk. Most employers use one of three structures — fully insured, self-funded, or level-funded. Here’s how they differ and how to choose what fits your organization.
Why the funding model matters
Funding determines who pays claims, how premiums are set, and how much data you can access about spending. Your choice influences budgeting, risk exposure, and long-term cost control.
Fully insured: predictability over flexibility
- Monthly cost: Fixed premiums to the insurer
- Risk: Carrier assumes all risk
- Claims data: Limited (high-level reports)
- Flexibility: Low (carrier designs plan)
Best for small employers prioritizing stability and simple administration.
Self-funded: maximum control, higher volatility
- Monthly cost: Variable (actual claims)
- Risk: Employer assumes risk (stop-loss recommended)
- Claims data: Full transparency
- Flexibility: High (customizable plan design)
Best for mid-to-large organizations with reserves and a tolerance for variability.
Level-funded: the hybrid middle ground
- Monthly cost: Fixed (bundled admin + pooled claims + stop-loss)
- Risk: Moderate (capped by stop-loss)
- Claims data: Partial to robust (varies by carrier/TPA)
- Flexibility: Moderate
Best for small-to-midsize groups seeking predictability with potential refunds when claims run low.
Quick comparison
| Feature | Fully Insured | Self-Funded | Level-Funded |
|---|---|---|---|
| Monthly Cost | Fixed premium | Variable (claims) | Fixed (refund potential) |
| Risk Exposure | Low (carrier) | High (employer) | Moderate (stop-loss) |
| Claims Transparency | Minimal | Full | Partial to full |
| Plan Flexibility | Low | High | Moderate |
| Potential Savings | None | High with good experience | Moderate |
How to choose
- Budget predictability: If certainty is critical, start with fully insured or level-funded.
- Risk tolerance: If you can weather volatility and want upside, consider self-funding.
- Data needs: For active cost management, transparency in level- or self-funding helps.
- Headcount & stability: Larger, stable groups typically handle variability better.
Want help comparing options?
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Talk to a Specialist →Related resources
Newsletter: Funding Models (quick read)
Short, plain-English breakdown of fully insured vs. self-funded vs. level-funded.
Read newsletter →Guide: Funding Models (in-depth)
Deeper comparison with scenarios, FAQs, and selection criteria.
Read guide →Blog: The State of Health Insurance in 2025
Trends shaping costs, distribution, and employer decision-making.
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