LEVEL-FUNDED VS FULLY INSURED: WHO PAYS WHEN CLAIMS COME IN.
In a fully insured plan the carrier takes the claim risk and the contractor pays a fixed premium each month. In a self-funded plan the employer takes the claim risk, and stop-loss insurance caps the cost above set limits. A level-funded plan packages the self-funded plan into one monthly amount, and some contracts settle the difference with a refund or credit after the year ends if claims were lower than expected. Terms differ by carrier, so the contract language decides who gets what. For a contractor the useful questions are what the monthly cash line is, whether a year end settlement exists, and what each design does to next year's renewal.
All three plan types pay for the same doctor visits. They differ in who pays when claims are higher or lower than expected, and that decides how the cost is recorded in the 13 week forecast, in the labor burden rate and in the renewal conversation. This page explains the money only. A licensed broker or benefits advisor places health plans, and SPM doesn't pick one for you.
WHAT IT MEANS.
A level-funded health plan is a self-funded plan packaged with stop-loss insurance, where the employer pays one monthly amount that covers expected claims, plan administration and the stop-loss premium. A fully insured plan charges a fixed premium and the carrier pays the claims.
Plan rules, tax rules and state law differ, and they differ between fully insured and self-funded plans. Fully insured plans are generally regulated under state insurance law, and self-funded plans are generally governed by federal rules, so what a state requires of a plan can depend on how the plan is funded. Check the specifics with your plan advisor and a tax professional before you act on anything here.
KFF's 2024 Employer Health Benefits Survey found that 63 percent of covered workers were in self-funded plans, including 20 percent of covered workers at small firms and 79 percent at large firms. Self-funding is far more common as a firm gets bigger. Which plan types a particular carrier offers to a particular contractor depends on the carrier, the state and the group's own claims history, and the broker can say what is on the table.
WHO PAYS WHAT, AND WHEN.
Fully insured: the carrier pays the claims
The contractor pays a premium set for the plan year, usually per enrolled employee per month, and the carrier pays the claims. If claims come in higher than the carrier expected, the contractor still pays the same premium for the rest of the year. If claims come in lower, the carrier keeps the difference. The cost for the year is known on the day the plan starts, and the claims experience is reflected in the next renewal.
Self-funded: the employer pays the claims up to a limit
In a self-funded plan the employer takes the financial risk of paying employees' claims under the plan's terms, and a third party administrator usually processes them. Most self-funded plans buy stop-loss insurance. A specific limit covers a single person's claims above a set amount, and an aggregate limit covers the whole group's claims above a set total. The cost in any month depends on the claims that month, plus administration fees and the stop-loss premium. The employer keeps the savings in a good year and pays the claims in a bad year, up to the stop-loss limits.
Level-funded: the self-funded plan in one monthly amount
KFF describes level-funded plans as a small self-funded piece packaged with stop-loss coverage that limits the employer's liability and transfers a substantial share of the risk to insurers. SHRM describes the employer paying the same monthly amount to the carrier to cover the estimated cost of expected claims, the stop-loss premium and plan administration. The monthly amount looks like a premium on the bank statement. What's inside it differs, because part of it is money set aside to pay claims.
What happens at year end depends on the contract
Some level-funded contracts return unused claims money to the employer after the plan year ends, in whole or in part, and some don't. The terms differ by carrier: how much comes back, when, and what claims are still counted. After a year with high claims, the same sources point the other way. The stop-loss part of next year's price can rise, so the cost appears in the renewal and not in this year's monthly amount. In a fully insured plan there's no year end settlement, and the renewal reflects the whole year.
Renewal works differently in each type
A fully insured renewal is a new premium for the next year, and for smaller groups an increase isn't always tied to the group's own claims, since carriers add margin and price on market trends too. A level-funded or self-funded renewal looks at the group's claims against the funded amount and re-prices the stop-loss and the claims funding. In one published consultant case study a carrier agreed to recalculate a renewal using newer months of claims, so the numbers in a renewal can move when the contractor asks for the detail behind them.
Two monthly amounts aren't the same cost
A quote of $19,000 a month for a level-funded plan and $20,000 a month for a fully insured plan can't be compared on the monthly figure alone. The level-funded amount might include a refund right, a stop-loss premium that can rise, and claims money that stays in the contractor's account until it's settled. The fully insured premium is spent when it's paid. A comparison needs the monthly amount, the year end settlement terms, the stop-loss limits and the renewal terms side by side, and the broker can produce all four.
WHAT IT LOOKS LIKE IN DOLLARS.
Take a contractor with a fully insured quote of $20,000 a month, or $240,000 for the year, and a level-funded quote of $19,000 a month, or $228,000. Say the $19,000 breaks into $12,000 of funded claims, $2,500 of administration and $4,500 of stop-loss premium. That's $144,000, $30,000 and $54,000 for the year, which adds to $228,000. These are round invented inputs and the real split comes from the carrier's quote.
In a good year, claims paid total $120,000 against $144,000 funded. The $24,000 left over is returned in full under one contract, or $12,000 under a contract that returns half, so the net cost is $204,000 or $216,000 against $240,000 fully insured. In a bad year, claims paid total $170,000 and the contractor still pays $228,000 in monthly amounts, since stop-loss responds to claims above its limits. In the fully insured plan the contractor pays $240,000 in both years.
After the bad year the level-funded renewal comes in at 10 percent higher, which moves $19,000 to $20,900 a month, or $250,800 a year, and the fully insured renewal also changes. In the good year the contractor got back up to $24,000 but the credit comes in one week, once, after the plan year closes. A 13 week forecast treats the $19,000 as a monthly line and the credit as a one time inflow only once the carrier has stated its amount and date.
WHAT WE BUILD INTO THE NUMBERS.
SPM puts the monthly amount in the forecast on its real payment date, next to payroll and the other fixed bills. For a self-funded plan, SPM adds a claims line with a range and a cash cushion, since the cost depends on claims paid. A year end credit goes in only when the carrier has stated the amount and the date in writing.
The employer's share of the monthly amount goes into the labor burden as a cost per hour worked. A fixed premium makes that rate easy to hold from month to month. For a level-funded plan SPM uses the monthly amount in bids and books any credit when it's received, so a possible refund doesn't lower a bid price. See the labor burden page for how the rate is built.
SPM asks for claims paid against the funded amount, the stop-loss renewal rate shown separately, the year end settlement terms and any change in the specific limit, and it asks the broker to say what caused the increase. The same list is asked of a fully insured renewal. SPM doesn't pick the plan. The broker places it, and the owner decides.
Health cost goes into job costing through the burden rate, and the books show the cost per enrolled employee each month. After a renewal SPM compares the new monthly amount with the burden rate in open bids, so a bid priced last spring isn't still using last year's cost.
FLAT MONTHLY FEE. NO SURPRISES.
Three tiers, priced by your trailing twelve month revenue. Which one you're in depends on how much of the work you want off your desk. No hourly billing. No payroll. The one-time onboarding fee is right here in the table.
| Last 12 months revenue | Monthly fee | One-time onboarding |
|---|---|---|
| Up to $1M | $1,900 to $2,900 | $1,000 |
| $1M to $3.5M | $2,600 to $3,900 | $1,500 |
| $3.5M to $6.5M | $3,800 to $5,700 | $3,000 |
| $6.5M to $9.5M | $5,100 to $7,100 | $4,500 |
| $9.5M to $12.5M | $6,100 to $8,500 | $6,000 |
| $12.5M to $15.5M | $7,400 to $11,000 | $7,500 |
| $15.5M to $18.5M | $9,400 to $13,500 | $9,000 |
| $18.5M+ | Quoted individually | Quoted individually |
The onboarding fee covers migrating your books back to the start of your last taxable year and getting you fully operational in 60 days. It's billed once, with your first invoice. It's the same for all three tiers. Your first month is prorated, and your monthly engagement starts on the first of the first full month.
Range reflects the three tiers below. Which one you're in depends on how much of the work you want off your desk. No payroll. No hidden line items. The onboarding fee is right here in the table.
You stop guessing.
You get the CFO work. Job costing built against the way you estimate, a 13 week cash forecast, monthly WIP, and a meeting every month that ends in decisions and never in a report.
Your bookkeeper still does the books.
You stop touching the books.
Everything in Core, and we do the bookkeeping and the controllership as well. Your office stops answering coding questions and stops fixing a reconciliation that will not balance on the last day of the month.
We do the books. No payroll.
Every job shows its margin while it is still open.
Everything in Executive, plus the job costing and WIP platform set up, loaded with your cost codes, and managed for you every month. You never have to learn it.
We do the books, the job costing, and the software. No payroll.
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