Five Answers to One Question
Every funding structure answers the same question: how much of your own claims risk do you want to hold, and what do you want in exchange for holding it? They are not a ladder to climb as you grow. They are different trades.
| Who holds the risk | Cash flow | Claims data | Surplus if claims run low | |
|---|---|---|---|---|
| Fully insured | The carrier | Fixed premium | Limited or none | Kept by the carrier |
| Level-funded | You, up to stop-loss | Fixed monthly payment | Yes | Returned or credited to you |
| Self-funded with stop-loss | You, up to stop-loss | Varies with claims | Yes, in full | Stays with you as it accrues |
| Group captive | You, plus a shared pool layer | Fixed contribution | Yes, plus pool reporting | Retained in the captive |
| ICHRA | Not applicable — no group plan | Fixed contribution you set | Not applicable | Not applicable |
What Actually Distinguishes Them
Fully Insured
The carrier takes the risk and sets the rate. Simple, predictable, and the structure most employers start with. Its real cost is invisibility: if your group runs better than the pool it was rated into, the difference is kept by the carrier, and you generally cannot see enough of your own claims to argue about it.
Level-Funded
Self-insured underneath, packaged to behave like a premium. You pay a fixed monthly amount covering expected claims, administration and stop-loss. If claims come in under expectation, the surplus is returned or credited rather than retained by the carrier. If they run over, stop-loss caps the exposure and the monthly figure holds for the year.
For a group whose experience is better than its rating suggests, this is usually the first structure where that shows up as money rather than as a slightly better renewal.
Self-Funded With Stop-Loss
You pay claims as they are incurred, with specific stop-loss protecting against a single large claim and aggregate stop-loss against a bad year overall. More administrative work and more month-to-month variability, in exchange for removing the margin built into a packaged arrangement and seeing everything.
Group Captive
Employers pool the middle layer of risk — above what each retains, below the catastrophic layer — in a shared entity they collectively own. Underwriting profit that would otherwise sit with a carrier stays in the pool. The trade is a multi-year commitment and exposure to how other members’ experience runs, which makes member selection a substantive question rather than a formality.
ICHRA
A different category. Rather than financing a group plan, you set a contribution and employees buy individual coverage with it. What changes is the nature of the commitment — a number you control instead of a renewal a carrier hands you. Our ICHRA guide covers when it fits.
If your shortlist has narrowed to level-funded versus a medical stop-loss captive, those two are compared directly — on capital at risk, commitment length, claims transparency and exit cost — in stop-loss captive vs level-funded.
The Questions That Decide It
- How does your own experience actually run? Everything else is secondary. A group with genuinely favourable claims is subsidising a pool; a group with poor experience is being subsidised by one, and moving usually makes that visible rather than better.
- Can you absorb a bad month? Self-funding asks this directly. Level funding and captives largely answer it for you.
- Do you want the data? Claims visibility changes what every future renewal conversation looks like, independently of which structure you land on.
- How long a commitment can you make? A captive is a multi-year decision by design.
- Who does the work? Self-insured structures move administration, compliance and reporting onto you and your partners.
We place all of these — fully insured, level-funded, self-funded with stop-loss and group captives — which means the recommendation is not constrained by what we happen to sell. The analysis that settles it is a model against your own claims history rather than a general argument. Send us your renewal and your last two years of claims and we will run it.
Questions We Get
What is the difference between level-funded and self-funded?
Both are self-insured underneath. Level funding packages the pieces — expected claims, administration and stop-loss — into one fixed monthly payment, so the employer’s cash flow looks like a premium. True self-funding pays claims as they are incurred, which is less predictable month to month but removes the margin built into the fixed payment.
At what size does self-funding make sense?
Less a matter of size than of credibility and tolerance for variation. Level funding is workable well below a hundred employees. Full self-funding is usually considered from a few hundred lives upward, because a single large claim moves a smaller group’s numbers too far for the year to be readable.
What is a group health captive?
An arrangement where employers pool the middle layer of risk — above their own retained claims, below the catastrophic layer — in a shared entity. Members keep underwriting profit that would otherwise go to a carrier, and take on a multi-year commitment and shared exposure to the pool’s experience in exchange.
Do we get our claims data if we are fully insured?
Usually not in any useful form below a certain size. This is one of the underrated reasons employers move: not the immediate cost, but that self-insured structures give you claims data, and without it you are negotiating a renewal you cannot see inside.
What happens if claims run high on a level-funded plan?
The stop-loss layer caps the exposure and the monthly payment holds for the plan year. The consequence arrives at renewal, when the following year is priced against the experience. Level funding limits the damage within a year; it does not insulate you from a bad one.
Is an ICHRA a funding model?
Not in the same sense. The other options are ways of financing a group plan. An ICHRA replaces the group plan with a defined contribution toward individual coverage, which changes what the employer is committing to rather than how the same plan is paid for.
Can we go back to fully insured if it does not work?
Generally yes, though timing matters and the market you return to will have seen your experience. The greater friction is with a captive, where the commitment is multi-year by design and leaving early is deliberately made unattractive.
Unhappy with your current broker? Switch to CFH. Your employees won’t notice. You will.
