Health Plan Types, Explained: Fully Insured vs. Self-Funded vs. Level-Funded

When it comes to adopting a health plan for an organization, many brokers and decision-makers choose a traditional fully insured plan. However, these types of plans often no longer meet the needs of many organizations that prioritize transparency, control, and long-term cost stability.

Thankfully, in today’s modern market, there are more options to address rising healthcare costs and employer demand for greater flexibility. Understanding the differences between fully insured, self-funded, and level-funded plans is essential to guiding clients and employers toward smarter and more sustainable healthcare solutions.

What is a Fully Insured Health Plan?

This type of plan is typically the one that is most familiar to brokers and employers. In a fully insured plan, the employer pays a fixed monthly premium to an insurance carrier, which assumes full responsibility for claims.

Pros:

• Predictable monthly costs
• Minimal risk management for the employer

Cons:

• Limited flexibility in plan design
• Higher long-term cost
• Inability to manage claims affects the ability to improve cash flow

Fully insured plans offer simplicity, but they often limit an employer’s ability to proactively manage factors that increase health plan costs.

What is a Self-Funded Health Plan?

In a self-funded plan, the organization assumes financial responsibility for claims and pays them as they occur, typically with operational support from a third-party administrator (TPA). The TPA manages workflows such as claims processing, network access, and member support. This allows the employer to maintain control and transparency without building internal health plan infrastructure.

Pros:

• Greater control over plan design
• Full access to detailed claims and utilization data
• Potential for significant cost savings
• Flexibility to implement proactive cost-containment strategies
• TPA manages daily plan operations
• Better control of cash flow through stop-loss coverage
  

Cons:

• Requires thoughtful and active risk management

For employers who are willing and able to actively manage risk, self-funded plans offer unmatched transparency and control.

What is a Level-Funded Health Plan?

Level-funded plans combine elements of fully insured and self-funded models. Employers pay a fixed monthly amount that covers expected claims, stop-loss coverage, and administrative costs, while maintaining control over other aspects of the plan, such as claims data. A TPA also plays a crucial operational role by managing claims, networks, and member services.

Pros:

• Predictable monthly costs
• Refund potential if claims run lower than expected
• Access to claims data
• Lower risk than full self-funding
• Operational support from a TPA

Cons:

• Less control and customization compared to full self-funding
• Requires some risk tolerance

For small- and mid-sized employers interested in exploring alternative funding, level-funded plans can be the first step away from fully insured plans.

Why Brokers Are Driving Self-Funded and Level-Funded Plan Adoption

In today’s shifting market, many brokers, consultants, and other benefits decision-makers are increasingly guiding employers toward self-funded and level-funded plans.

Some of the key factors driving this shift include:

• Rising healthcare costs and increasingly high deductibles, leading to high waiver or employee opt-out rates
• Desire to customize benefits and plan design to meet workforce preferences
• Need for data-driven decision-making to improve long-term plan performance

For brokers, these more flexible models offer the chance to differentiate with innovative solutions tailored to client needs.

A Real Success Story: Moving Seamlessly from Fully Insured to Self-Funded

Before partnering with OneVeracity, a public sector employer faced unsustainable premium increases under their fully insured plan, including a 29% rate increase. Looking for long-term stability, the employer partnered with OneVeracity to transition to a self-funded model that combined stop-loss coverage with integrated care and other cost controls.

The Impact

• Over 30% lower total plan costs compared to remaining fully insured with flat renewals
• Nearly 40% lower costs compared to 5% annual premium increases with their previous carrier
• Greater transparency across claims, pharmacy, and care delivery
• Improved member navigation, support, and clinical outcomes

With our unique integrated approach, OneVeracity helped transition the employer to a more predictable plan with increased control. This client has remained with OneVeracity since 2020, showing the long-term sustainability of a self-funded plan.

How OneVeracity Supports Brokers and Employers

Whether you’re just starting to explore alternative funding options or are ready to make the transition, OneVeracity supports brokers and employers through every stage of plan evaluation and implementation.

As a strategic partner, we offer tools, resources, and consultative support for transitions to self- or level-funded plans. Once you’re ready to make the switch, OneVeracity offers:

• Benefits management focused on streamlined administration and risk solutions
• Pharmacy cost management to reduce medication spend
• Care solutions to improve clinical outcomes
• Onsite health centers to improve member access and engagement
• Advanced analytics and reporting to optimize plan performance

The Bottom Line

While traditional fully insured plans offer simplicity, they often come at a higher cost and with limited control. Self-funded and level-funded plans provide employers with greater flexibility, transparency, and potential savings when paired with the right risk management and care strategies.

Are you ready to support your clients with smarter, more sustainable funding strategies? Contact us today to explore resources and partnership support.