WHY EMPLOYERS ARE LOOKING BEYOND FULLY INSURED PLANS
For decades, the fully insured medical plan was the default choice for most employers: pay a fixed monthly premium, let the carrier absorb the risk, and move on. Rising healthcare costs are changing that calculus fast.
Health insurers filed a median 11% premium increase for the small group market in 2026, and employers nationally are budgeting for roughly 9% cost trend this year – among the steepest increases in more than a decade. Small firms are getting hit hardest, often paying twice what larger employers pay for comparable coverage.
HOW EACH FUNDING STRUCTURE WORKS
FULLY INSURED
The employer pays a fixed monthly premium to a carrier. The carrier sets rates, manages claims, and bears all financial risk. Costs are predictable, but the employer has little visibility into claims data and no upside if the group has a healthy year, any surplus stays with the carrier.
LEVEL FUNDED – THE MIDDLE PATH
Level funding is essentially self-funding wrapped in a fixed-premium package. The employer pays a level, budgetable monthly amount that bundles estimated claims costs, admin fees, and stop-loss premium – similar in feel to a fully insured bill. Underneath, the plan is legally self-funded: claims are paid from a claims fund, stop-loss protects against high-cost claims, and if claims run below projections, the employer can receive a refund of the surplus.
SELF-FUNDED
The employer pays employee medical claims directly out of company funds as they’re incurred, using a third-party administrator (TPA) to process claims and stop-loss insurance to cap catastrophic exposure. Because self-funded plans are primarily regulated under federal ERISA law, they’re exempt from most state mandates and all premium taxes – and the employer gets full claims-level data and complete plan design flexibility.
LET’S FIND THE RIGHT FIT
There’s no universally “right” funding model – the right fit depends on group size, claims stability, financial reserves, and risk appetite. But with small-group premiums climbing double digits and cost trend running near 9% nationally, more employers are finding that staying on the fully insured default by habit is costing them real money and real flexibility. Level funding, in particular, has emerged as an accessible entry point: it lets employers dip a toe into self-funding’s savings potential and data transparency without taking on the full cash-flow risk of standalone self-funding.
Every group is different. Beehive’s consulting team can model fully insured, level-funded, and self-funded strategies side by side using your specific census and claims experience – so you can see, in real numbers, what each path would mean for your organization.
