For employers in Charleston, Mount Pleasant, and Greenville, one of the biggest employee benefits decisions each year is how to fund the company health plan.

Two of the most common options — fully insured and level-funded plans — both provide employees with quality coverage, but they work very differently behind the scenes. Understanding those differences can help you choose the funding model that best fits your workforce, your budget, and your appetite for risk.

What Is a Fully Insured Health Plan?

A fully insured plan is the traditional approach most employers know well. The business pays a fixed monthly premium to an insurance carrier, and in exchange, the carrier assumes all financial responsibility for employee medical claims. If claims run high in a given year, the carrier absorbs the loss. If claims run low, the carrier keeps the surplus.

This model offers simplicity and predictability. Premiums are set for the plan year, administration is handled by the carrier, and employers don’t need to manage claims data or funding accounts. The tradeoff is that a healthy year with low claims doesn’t translate into savings for the employer — and premiums can rise significantly at renewal, especially after a year of high utilization.

What Is a Level-Funded Health Plan?

A level-funded plan is a hybrid arrangement that blends features of fully insured and self-funded coverage. Employers pay a fixed monthly amount, similar to a premium, but that payment is actually divided into three components: a claims fund, administrative fees, and stop-loss insurance premium.

The claims fund covers actual employee medical expenses as they’re incurred, up to a set attachment point. Stop-loss insurance then protects the employer from catastrophic claims above that threshold, capping financial exposure. If claims come in below the funded amount at year-end, employers may receive a refund or credit toward the next plan year. If claims exceed what was funded, stop-loss coverage absorbs the difference, so the employer generally isn’t billed for the shortfall.

Key Differences at a Glance

Risk: Fully insured shifts risk entirely to the carrier; level-funded shares some risk with the employer, capped by stop-loss protection.
Cost potential: Level-funded plans can offer meaningful savings for healthier groups, since unused claims dollars may be refunded. Fully insured plans offer no such upside.
Compliance: Level-funded arrangements typically come with more administrative and compliance responsibilities, including ERISA, ACA, and PCORI reporting.
Predictability: Both offer fixed monthly costs, though level-funded employers should be prepared for an unfavorable claims year affecting renewal.
Employee experience: Employees generally notice no difference — they use the same ID cards, networks, and claims processes either way.

Which Plan Fits Your Business?

Level-funded plans tend to work well for small to midsize businesses with a relatively healthy workforce, stable cash flow, and a desire for more customization and claims transparency. Fully insured plans are often the better fit for businesses that want maximum budget certainty, have limited HR bandwidth for compliance oversight, or have a workforce with higher-than-average health risk.

There’s no universally “right” answer. The best funding strategy depends on your company’s size, claims history, risk tolerance, and administrative resources. It’s also worth revisiting the decision periodically, since a plan that made sense a few years ago may not be the best option as your business grows.

Frequently Asked Questions

Is a level-funded plan the same as self-funded? Not exactly. Level-funded plans are a form of self-funding with a fixed monthly payment and built-in stop-loss protection, making the cash flow feel more like a traditional premium.

Can a level-funded plan save my business money? It can, particularly if your workforce is healthy and claims come in below the funded amount, resulting in a refund or credit. There’s no guarantee, though, since claims experience varies year to year.

Are level-funded plans only for large employers? No. Level-funded plans are often designed specifically for small and midsize employers, sometimes with as few as 10 to 25 employees, depending on the carrier.

Not Sure Which Option Makes Sense for You?

Choosing between a level-funded and fully insured plan isn’t a decision to make from a rate sheet alone — it depends on your claims history, workforce demographics, and long-term goals. The team at Beckham Ellis Insurance Group works with employers throughout Charleston, Mount Pleasant, and Greenville to compare funding options side by side and build a benefits strategy that fits your business. If your renewal is approaching or you simply want a second opinion on your current plan, contact Beckham Ellis Insurance Group to talk through your options.

This article is intended for general informational purposes and is not legal, tax, or actuarial advice.