With alternative funding, claims experience feeds directly into cost.
Level-funded and self-funded plans pay actual claims, so claims experience matters more. Stop-loss terms also shape the result.
Why funding type changes how you read the loss ratio
On a fully insured plan the carrier absorbs the swings: a bad year raises your renewal, but you do not write a check for the claims themselves. On a level-funded or self-funded plan the employer pays actual claims up to a limit, so the same bad year shows up in cash flow, not only in the next renewal.
That is why loss ratio is read differently here. A level-funded plan is built from a monthly fixed amount that covers expected claims, the administrative fee, and the stop-loss premium. At the end of the plan year the claims are compared with what was set aside. Depending on the contract, unused funds may be returned, kept as a credit, or not returned at all, so the refund terms deserve as much attention as the rate.
Stop-loss does the work that the carrier’s risk pool does on a fully insured plan. Specific stop-loss limits what the plan pays for any one person, and aggregate stop-loss limits total claims for the year. The attachment points, the contract basis (paid or incurred), and the lasering of individual members all change what the employer is really exposed to.
When we review a level-funded or self-funded renewal we look at claims by month, large-claim activity against the specific attachment point, the aggregate corridor, and how the quoted renewal was built. A rise in rate with flat claims tells a different story from a rise in rate after one large claim, and the right response is different too.
What to decide and where it connects
Captive vs Level-Funded
Funding options and stop-loss.
Pooling
How large claims are treated.
Run the Calculator
Calculate your group’s loss ratio.
Questions about this topic
Does loss ratio matter more on level-funding?
Yes. Your own claims experience drives the renewal.
What is stop-loss?
Insurance that limits an employer’s exposure to large claims on a self-funded plan.
Do refunds apply?
Some level-funded plans return unused funds depending on terms.
Ready? Send us your renewal, or talk it through with someone first. General information, not legal or tax advice.
Where these details come from.
CMS: Medical Loss Ratio: Federal MLR rule and rebate guidance.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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