Health Plan Funding Options: Fully Insured, Level Funded, Captive, and Self-Funded
If your health plan renewal feels like something that happens to you rather than something you shape, you're not alone. How you fund your plan is one of the biggest levers you have over what you pay and what you can see.
The options below run in order, from the least risk the employer holds to the most. At one end, you hand nearly all of it to a carrier and pay for the predictability. At the other you hold more of it yourself and keep more of the reward in a good year.
Review the options, make notes on your questions, and then let's set up a call to talk about which are good-fit options for your company. We work with employers across Dallas-Fort Worth, most often between 50 and 500 employees.
Where do you fit?
Let’s explore a benefits strategy that works for your business and your people. We'll run your actual census and claims and tell you what the move would cost or save, including when the answer is to stay where you are.
A note on how self-funded plans get administered
Once you self-fund, you can have a carrier administer the plan under an administrative services-only contract, or hire an independent third-party administrator and shop each component separately.
The money works the same either way, which is why they are not separate positions on this spectrum. Which one fits depends on how much of the plan you intend to actively manage, and that comes from a conversation rather than a calculation.
And a note on plan design
Pairing a fully insured plan with a health reimbursement arrangement is a plan design choice, not a funding one. Your economics stay fully insured.
Done well, it is a first step toward cost sharing. When done poorly, it results in a deductible increase that employees discover in January.
Both have you paying your own claims. With level funding, you pay a fixed monthly amount that covers expected claims, administration, and stop-loss, and you get money back if claims are low. With self-funding, you fund claims as they happen, so your monthly cost moves with usage.
Fifty or more is the usual starting point, though solid claims data can matter more than headcount. Either way, it depends on steady cash flow, reserves you can draw on during a rough stretch, and a willingness to think in four- to five-year terms.
No. A PEO gives your employees benefits through its own larger plan, so you aren't funding a plan at all. It's usually chosen for the payroll, HR, and compliance support that comes with it, with benefits as part of the package.
Stop-loss insurance caps your exposure when claims run high, on either a self-funded or a level-funded plan. On a self-funded plan, it caps both any single large claim and your plan's total claims for the year. It's the reason holding your own risk doesn't mean holding unlimited risk.
No. Reference-based pricing changes what your plan pays providers, which only works when you control those payments. You control payments in a self-funded plan, including one run through a captive.
On a fully insured plan, your cost is fixed for the year, though your renewal may jump. With level funding, you won't exceed your stop-loss, but you may get no refund and a firmer renewal. With self-funded coverage, your monthly costs track with claims until stop-loss takes over.