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- Level funded costs less on average. Ignition Benefits surveyed 503 US company leaders in 2026 and found fully insured plans cost $8,005 per employee per year, against $5,914 for level funded and self funded plans.
- Level funded fits companies with up to about 200 employees and a young, healthy workforce. It is the only one of the two structures that returns money at year end.
- Fully insured fits any workforce, including older teams and teams with higher claims. There is no underwriting, no year-end reconciliation, and no claims risk on the company's books.
- Level funded is not sold in every state, and some groups will not qualify for it at all. Either fact settles the decision on its own.
- Lower cost and more control are different things. In a separate Ignition survey of CFOs, only 5% of those on level funded plans said they are managing costs effectively.
The difference between level funded and fully insured comes down to who pays the claims. On a fully insured plan, the carrier takes that risk for a fixed premium. On a level funded plan, you take the risk, with stop-loss insurance capping how much you can lose, while you keep part of the unused claims.
That structure usually costs less for a healthy team. Ignition Benefits surveyed 503 leaders at US companies with 10 to 250 employees in 2026 and found fully insured plans cost $8,005 per covered employee each year, compared with $5,914 for level funded and self funded plans. At 60 covered employees, that’s a $125,000 difference per year.
The average is not your answer, though, because the savings depend on your team being healthier than the pool your carrier prices against. Below is a side-by-side reference, then a full breakdown of cost, risk, underwriting, renewals, compliance, and how to tell which structure fits your company.
What Is a Fully Insured Health Plan?
A fully insured plan is the traditional model. The employer pays a fixed monthly premium to a carrier, and the carrier pays every employee medical claim, however high those claims run that year. Money moves in one direction, from employer to carrier.
Fully insured remains the default for most small companies because it removes every variable. There is no year-end reconciliation, no claims risk on the company's books, and no additional bill if several employees have an expensive year. The employer pays the quoted rate, and the carrier absorbs the rest.
That certainty is priced in. KFF's 2025 Employer Health Benefits Survey put the average annual premium at $9,325 for single coverage and $26,993 for family coverage, up 5% and 6%, respectively, on the year.
For a 50-person team where everyone takes family coverage, a 6% increase adds about $80,000 to the annual premium bill. That figure comes down as more of the team takes single coverage instead.
What Is a Level Funded Health Plan?
A level funded plan looks like a fixed monthly bill from the outside, but the payment actually covers three separate things:
- A claims fund that pays expected medical and pharmacy costs
- A stop-loss insurance premium that caps how much the employer can lose in a bad year
- An administrative fee paid to the carrier or a third-party administrator
Claims are paid out of the claims fund each month. If claims run higher than projected, stop-loss insurance covers the excess, so the monthly payment does not change mid-year.
At the end of the plan year, the carrier compares what was spent against what was collected. If claims came in under budget, some or all of the surplus goes back to the employer, and the employer owes nothing extra if claims came in over. That is the trade: you carry the modeling risk in exchange for keeping the savings a carrier would otherwise keep.
Level funded plans are rapidly gaining adoption. KFF found that 37% of covered workers at firms with 10 to 199 employees were in a level funded plan in 2025.
Ignition Benefits: How to Actually Make the Decision
Neither structure is better in general. The right answer depends on the risk score a carrier calculates for your specific workforce, plus your cash flow and headcount growth rate.
Most companies never see either input. In Ignition's July 2026 survey, only 31% of leaders received a clear breakdown of what was driving their cost increase at the last renewal, and 41% assumed their broker was already finding them savings while just 6% had ever checked.
Every carrier scores your workforce on age, gender, and location before it quotes you. Ignition Benefits pulls that Benefits Risk Score and runs a full market audit at every renewal across both funding structures, so you compare real quotes instead of estimates.
See what both structures would cost your team. Get side-by-side quotes on level funded and fully insured before your renewal date.
Cost Predictability
Both structures give you one fixed number to plan around each month. The difference is what happens after that number is set.
Level Funded
The fixed monthly payment covers projected claims, administrative fees, and the stop-loss premium, so the cash flow forecast holds for the full year. Stop-loss means a bad claims month never becomes a larger bill mid-year.
The limit on that predictability is the year-end result. If claims land close to the projection, there is little or no refund, and next year's rate resets based on what your group actually spent.
Fully Insured
The premium is locked for the contract period, usually 12 months, with no reconciliation afterward. Your rate does not move again until renewal, whatever the carrier's claims experience looked like across its book.
That stability comes at a cost. The baseline premium runs higher because the carrier prices your group alongside every other group in the pool, which means healthy groups help pay for higher-risk ones.
Verdict
If cash flow certainty is the CFO's first priority and any swing in cost is unacceptable, fully insured wins. If total annual cost matters more and the company can absorb a rate that resets on last year's claims, level funded usually wins.
📖 Read More: For a fuller comparison of the risk-bearing options, see the difference between self-funded and fully funded plans.
Risk Exposure and Year-End Refunds
This is where the two models fully diverge and where the savings actually come from.
Level Funded
The employer holds the claims risk, and stop-loss insurance limits how much of it the employer carries. If claims come in under the amount funded, the employer receives some or all of the difference.
UnitedHealthcare reports that groups moving from its fully insured plans to its level funded plans paid 19% less on average during 2025 and states that savings are not guaranteed. Ignition's own survey data points in the same direction, with fully insured plans costing $2,091 more per employee each year than level funded and self funded plans.
Fully Insured
The carrier absorbs the claims risk in full, so a healthy year never comes back to the employer as money. The surplus stays with the insurer and spreads across every group in the pool rather than going to the employer whose team stayed healthy.
Verdict
Level funded savings rests on the assumption that your workforce is healthier than the community pool a fully insured carrier prices against. If that is true, level funded usually wins. If your team's risk profile is average or worse, the same mechanism works against you, and fully insured keeps you out of it.
Note: Affordable on paper does not mean more control. Ignition and CFO Leadership surveyed nearly 150 US CFOs and found that only 5% of level funded respondents said they were managing costs effectively, against 20% of fully insured and 46% of self funded respondents. The savings arrive whether or not you have the data to defend them at the next renewal.
Underwriting and Onboarding
Getting a quote works differently for each structure, and that affects how quickly you can move.
Level Funded
Carriers price level funded plans against your actual team. These plans, unlike insured plans, use health status in rating and underwriting. That means submitting an employee census and, in most cases, health questionnaires or prior claims data.
Carriers also set a minimum share of eligible employees who must enroll, and they apply that requirement more strictly on level funded plans than on fully insured ones. Confirm the exact threshold with each carrier, because it varies.
Fully Insured
Small-group fully insured plans have been guaranteed issue under the Affordable Care Act (ACA) since 2014. A carrier cannot decline your group or price it on employee health history. The remaining rating factors are age, location, family size, and tobacco use.
Verdict
Fully insured is faster to stand up because there is nothing to underwrite. Level funded takes more paperwork at the start, and the result is a plan priced to your team instead of a shared community rate. If you are considering who runs that process, compare how to choose a benefits broker before you start collecting census data.
Rate Stability at Renewal
Your next renewal often decides this question, because it determines whether your rate reflects your own team or someone else's claims year.
Level Funded
Your renewal is driven by your own group's claims from the prior year. A quiet year can produce a flat or lower rate. A rough year, including a single high-cost claim, can push the increase well above what a comparable fully insured group would see.
Stop-loss caps your exposure inside the current year, but it does not remove the effect of those claims on next year's projection.
Fully Insured
Your renewal is driven by the carrier's whole risk pool rather than your group, which cuts both ways. A healthy year earns you nothing, and a bad year across the pool raises your rate even if your own claims were low.
That pattern shows up in Ignition's survey data. Among leaders who could name their renewal number, 39% took a double-digit increase, and the average increase was 7%. Jeremiah Swett, CFO at Black Label Marine Group, described the effect this way in the CFO survey: "We often see significant premium increases despite having a favorable claims year."
Verdict
Fully insured separates your renewal from your own team's claims, so one expensive employee will not reset your rate. Level funded ties your renewal directly to your own risk, which rewards a healthy year but affects projections on the next one. If your plan is currently inside a PEO, the pooling question is different, so the PEO and broker arrangements should be compared separately.
Compliance and Regulatory Treatment
The two structures sit under different parts of the regulatory system, which changes both your flexibility and your paperwork.
Level Funded
Level funded plans are generally treated as self-funded under the Employee Retirement Income Security Act (ERISA). They are usually not required to provide all of the essential health benefits that insured plans must cover. UnitedHealthcare describes this effect from the carrier side, listing exemption from many ACA regulations, including adjusted community rating and lower state premium taxes.
Reporting obligations increase with headcount. Department of Labor instructions require a Form 5500 for welfare benefit plans with 100 or more participants at the start of the plan year and exempt unfunded or fully insured plans below that count.
Note: Level funded is not sold in every state. States regulate stop-loss insurance differently, and some restrict it for smaller groups, so confirm availability in every state where your employees live before you plan around it.
Fully Insured
Fully insured plans fall under state insurance department oversight and follow ACA small-group rules in every state where they are sold. That includes guaranteed issue, community rating, and the full essential health benefits requirement.
Verdict
Fully insured brings simpler compliance and the consumer protections written into state insurance law. Level funded brings more freedom in plan design, adds reporting responsibilities, and is not available everywhere.
Which Funding Structure Fits Your Company
Four factors decide this more reliably than any general rule: headcount and growth, workforce health, cash flow tolerance, and where your employees live.
1. Team Size and Growth Trajectory
Level funded generally fits companies with up to about 200 employees. Above that, larger and more predictable groups often do better moving toward a fully self-funded structure instead. If you are hiring quickly, model what your headcount will be in 12 months rather than what it is now.
2. Workforce Health Profile
Level funded savings depend on your team being healthier than the pool a fully insured carrier prices against. A young team with low claims history is a strong candidate. A team with an aging population, chronic conditions, or a recent high-cost claim is better protected by a pooled fully insured rate.
3. Cash Flow and CFO Risk Tolerance
A fully insured premium never changes mid-contract, which some finance teams need for forecasting. A level funded payment is also fixed month to month, but the following year's rate can swing on your own claims. The real question is how the company would handle a renewal that lands well above budget.
4. State Coverage Footprint
If your entire team works from one state, confirm that level funded is sold there before you build a plan around it. If your employees are spread across several states and level funded is restricted in any of them, that alone can settle the decision for the whole group.
Each of these comes down to what your workforce's actual risk score says. Ignition's survey found that 19% of leaders were not familiar with level funded, self funded, or Individual Coverage Health Reimbursement Arrangement (ICHRA) models at all. Another 30% had never considered them, so most companies are choosing from a shorter list than the market offers.
See both numbers before you renew. Run a full market audit and see what level funded and fully insured would each cost your team.
Ignition Benefits: The Broker Behind the Funding Decision
Video embed here: https://youtu.be/LgORlUmyhUo?si=HXsmm90AB1oB9ioK
Choosing between level funded and fully insured is a calculation, and it runs on data most employers never receive. Ignition Benefits runs that calculation using your Benefits Risk Score, a full market audit across both funding structures, and side-by-side quotes.
Ignition Benefits Key Features
- Benefits Risk Score Transparency: Every carrier scores your workforce on age, gender, and location before it quotes a rate, and the employer never sees that score. Ignition surfaces it before going to market. It is the single most important input when choosing between level funded and fully insured, because it tells you whether your team is actually healthier than the pool.
- Side-By-Side Full Market Audit: Ignition quotes both funding structures across the full carrier market and delivers the comparison in a Benefits Analysis Report. This matters because founders hardly compare options.
- 14 to 21 Day Turnaround: Ignition delivers a completed Benefits Analysis Report in 14 to 21 days, against the 8 to 12 weeks a traditional broker review usually takes.
Ignition Benefits Pricing
Where Ignition Benefits Shines
- Companies outgrowing a bundled setup: Teams that got their plan through a PEO or a payroll platform's built-in brokerage and have never had it benchmarked against the open market.
- Healthy teams on a fully insured plan: A young, low-claims workforce is the exact profile that gains most from seeing a level funded quote next to its current renewal.
- Companies working to a renewal deadline: The 14- to 21-day turnaround fits inside a renewal window that an 8- to 12-week review would miss.
Where Ignition Benefits Falls Short
- Benefits-only scope: Ignition covers health benefits specifically, so companies wanting one vendor for payroll, HRIS, and broader HR compliance will need a separate platform alongside it.
Customer Reviews
"We assumed Gusto was getting us a fair deal on benefits. Two short calls with Ignition saved us six figures and got us better coverage than we'd ever had." Robert McConchie, CFO and Co-founder, AWM Capital.
“I didn't realize how much money we were leaving on the table until Ignition ran the numbers. We saved $113,000 in year one, on a 25-person team. For a company our size, that makes a big difference.” Nick Mares, CEO, Light Labs.
Who Ignition Benefits Is Best For
- Founders and CFOs at companies with up to 200 employees who own the benefits decision and want a data-backed answer on whether they are overpaying and which structure fits.
- Companies approaching 50 employees, where PEO pool pricing starts working against a healthy team and a direct market audit becomes worth running.
- First-time HR hires who inherited a plan nobody has audited and need a clear comparison before the next renewal.
Book your full market review and get level funded and fully insured quotes side by side.
See Your Benefits Risk Score With Ignition
right answer here is specific to your workforce, and no single rule covers every company your size. A young, healthy team with up to about 200 employees is the strongest candidate for level funded savings. A team carrying more claims risk, or one spread across states where level funded is restricted, is usually better off fully insured.
Both descriptions rest on the risk score a carrier assigns your workforce before it quotes you. A full market audit returns that score alongside pricing for each structure, using your actual census rather than an estimate.
FAQs
Is Level Funded Insurance Good?
It depends on your workforce. For a young, healthy team with up to about 200 employees, level funded can lower total cost and return a refund in a good year. For a team with higher claims risk, a fully insured plan's pooled rate is usually the safer fit.
Is Level Funded Cheaper Than Fully Insured?
Usually, for a healthy group. Ignition's 2026 survey found fully insured plans cost $8,005 per employee per year against $5,914 for level funded and self funded plans. UnitedHealthcare reports its level funded groups paid 19% less on average, and notes savings are not guaranteed.
Do Level Funded Plans Have Stop-Loss?
Yes. Stop-loss insurance is built into the monthly payment on every level funded plan. It caps what the employer pays when claims exceed the projected amount, which is what keeps the monthly bill from changing mid-year.
What Are the Risks Associated With Level-Funded Health Insurance?
The main risk is a rough claims year raising the following year's renewal, because the rate reflects your own group rather than a broad pool. Stop-loss limits your exposure inside a single year, but it does not prevent that renewal effect.
Does Level Funded Mean Fully Insured?
No. A level funded plan is a form of self-funding packaged to feel like a fully insured plan. The employer bears the claims risk, with stop-loss insurance limiting that exposure, while the carrier bears it entirely on a fully insured plan.
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