Level-Funded Health Plans in Michigan for Growing Employers
Many small and mid-size employers want more control over health costs, but they cannot handle big swings in their monthly bill. Level-funded health plans in Michigan are one way to get some of the benefits of self-funding while keeping a steady monthly payment.
We are CFH Insurance Consultants, an independent employee benefits consulting firm on Woodward Avenue since 2007. No carrier owns us, so we can compare level-funded plans with fully insured options and show you the trade-offs. To see how a level-funded or self-funded plan compares with your insured premium, use our funding comparison calculator.
Level-Funded Health Plans
A level-funded plan is a type of self-funded plan with a fixed monthly payment. That payment covers three things: expected claims, the cost to administer the plan and stop-loss insurance. Stop-loss protects you if claims run much higher than expected. Our free stop-loss attachment point calculator shows where aggregate protection begins next to expected claims.
At the end of the plan year, the numbers are settled. If claims came in low, some plans return part of the unused claims money or give a credit. If claims ran high, stop-loss protects you for that year, but your next renewal may go up. Every contract is different, so we read the fine print with you. To see how claims compare with premium, try our free group loss ratio calculator.
We compare level-funded offers from carriers Michigan employers use, such as Blue Cross Blue Shield of Michigan, Priority Health, UnitedHealthcare, Aetna and Cigna. We explain each one in plain words. After you sign, we hold the administrator to its contract and help your employees when questions come up. To see what could come back at year end, try our free level-funded surplus refund calculator.
Is level-funded health insurance good for a small business?
It can be. In Michigan, groups of 50 or fewer employees are small group. Their fully insured rates are set by carrier filings, ages and ZIP codes, not by the group’s own claims. A healthy small group may pay less with a level-funded plan, because its own claims history helps set the price.
It is not right for everyone. Some carriers ask for health information about employees before they will quote. A group with serious ongoing health costs may do better staying fully insured. We help you look at both sides before you decide.
What happens at renewal on a level-funded plan?
At renewal, the carrier looks at your claims from the past year. A good year can lower your cost. A hard year can raise it, sometimes more than a fully insured renewal would. That is why we start early. Most January 1 renewals arrive in October or November, and a head start gives you room to compare.
Where each dollar of the monthly payment goes
A level-funded quote looks like one number. Underneath it are separate pieces, and each one can be compared and negotiated on its own.
Expected Claims Funding
The largest piece. The carrier sets a monthly amount it expects your group to spend on medical and pharmacy claims, based on your census, plan design and, where available, your claims history. Claims are paid from this pool during the year. It is an estimate, not a cap, which is why the stop-loss pieces exist.
Administration
The fee for processing claims, running the network, handling customer service and supplying reports. Ask whether it is a flat monthly amount or per employee, whether network access and pharmacy benefit fees are inside it or on top, and whether it changes at renewal.
Specific Stop-Loss
Insurance against one very large claim. Once any one person’s claims pass the specific deductible, the stop-loss carrier reimburses the plan above that point. The deductible you choose is the biggest lever on both the premium and your risk. Employers choosing the deductible should consider how much unexpected claim cost the company could absorb in a bad year. Ask for quotes at more than one level to compare savings with added exposure.
Aggregate Stop-Loss
Insurance against the whole group running over budget. It pays when total claims for the year pass a set percentage of expected claims, often around 120 to 125 percent. In many level-funded programs it is built into the monthly payment, so your annual cost is capped at that number.
Commissions And Fees
Broker compensation and any other fees should be shown plainly on the proposal. Under federal law, broker compensation must be disclosed in writing to the plan fiduciary, so ask for it. Ask the adviser to show compensation as a line on the proposal and to explain whether it is built into rates or billed separately. Having the figure in writing makes it easier to compare options and review it at renewal.
The Result: One Level Payment
Add the pieces together and you get a single monthly payment. That is why the plan budgets like fully insured coverage even though it is self-funded underneath. Employers should still understand which parts of that payment are fixed and which could change at renewal. The monthly figure is easy to budget, but the underlying claims experience still determines how the plan is priced in later years.
What the carrier looks at before it quotes you
Unlike a fully insured small group plan, a level-funded plan can be priced and accepted based on your own group’s health. That is where the savings come from, and where the surprises come from.
Census And Demographics
Age, gender, family tier and zip code set the baseline. A younger, mostly single workforce prices very differently from an older one with many dependents. The mix matters because the carrier prices the risk it is taking on from the census. Employers should check that the census is accurate and current, since errors in age, tier or location can change the quote.
Health Information
Most carriers ask for a short health questionnaire, and some ask for claims history from your current carrier. A healthy group can earn a lower price. A group with a known high-cost claimant can be priced higher, quoted with that person carved out at a higher individual deductible (called lasering), or declined.
Participation And Contribution
Carriers set a minimum share of eligible employees who must enroll, and a minimum employer contribution. Both protect the plan from the healthiest people opting out. Employers should ask early what the thresholds are and how they are measured, since employees who have other coverage may not count toward participation. Missing a requirement can delay or limit the program a group qualifies for.
Group Size
Eligibility ranges differ by carrier and by program. A program built for a group of thirty may not fit a group of three hundred, so the programs we approach change with your size. Employers near the edge of a size range should ask which programs are open to them and how that could change as headcount grows or shrinks. A good fit now may not stay a good fit after a year of hiring.
Plan Design And Network
Deductible, out-of-pocket maximum, copays and network all move the expected claims number. We check the network against the doctors and hospitals your employees actually use before you commit. Plan design is also a communication topic, since employees compare the new plan with the current one. Employers should review the proposed deductible and copay levels with leadership before enrollment so the tradeoffs are understood.
Timing
Underwriting takes time, and a late or incomplete submission narrows your options. Starting early gives more programs time to quote and leaves room to negotiate. Employers can speed things up by gathering the census, current plan summary and recent claims or renewal documents before the quote request goes out. Complete information lets underwriters respond sooner and with fewer follow-up questions.
Refunds, runout and what happens at renewal
Most questions after the first year come down to three things: whether there is a refund, who pays claims that arrive late, and what renewal looks like after a good or bad year.
Surplus Refunds
If claims come in under the funded amount, some programs return part of the difference after the plan year closes. The share, timing and conditions vary. Some return all of the surplus, some a percentage, and some none. Get the refund terms in writing before you sign.
Claims Runout
Claims are paid weeks or months after they are incurred, so final numbers are not known on the last day of the year. A runout period gives the carrier time to settle late claims before it calculates any refund. Check what happens to claims that arrive after it ends.
Renewal Pricing
At renewal the carrier looks at your actual claims and may adjust the funding level, administration fee and stop-loss rates. A strong year can improve your renewal. A year with a large claim can raise it, and stop-loss is usually re-underwritten as well.
Rate Stability
Some programs offer a renewal rate cap or guarantee, and the terms differ. Ask whether one exists, what it costs and what conditions apply, so a good year is not given back at renewal. Employers should also ask how any guarantee applies if enrollment changes, if a large claim occurs or if the plan design is altered. Reading the exact terms before signing avoids a surprise when the renewal arrives.
Moving Back To Fully Insured
If your group becomes less attractive to level-funded carriers, a move back to a fully insured plan is usually available, though pricing then follows rating rules instead of your own experience. Plan the exit before you need it. Employers should ask what notice and medical information a fully insured carrier would need if the group moves back, and when the next opportunity falls. Organized plan documents and claims reports make the move easier.
Changing Carriers With Open Claims
A switch can leave claims from the old plan unresolved. The contract language on run-out and terminal liability decides which plan pays for claims incurred before the change but not yet processed, including anyone in the hospital on the switch date.
Level-funded, fully insured and self-funded side by side
These are three points on one spectrum of risk. The right one depends on how much volatility your budget can take and how much of the upside you want.
Fully Insured
You pay a premium and the carrier takes the claims risk. Pricing follows the carrier’s rating rules. There is no refund when claims are low and no extra bill when they are high. It is the simplest to run. Fully insured plans suit employers who want predictability and fewer moving parts. The tradeoff is that a low-claims year does not return money, so stability is paid for through the rating formula.
Level-Funded
A fixed monthly payment with a stop-loss backstop and the chance of a refund. Pricing reflects your group’s own experience. Most of the claims risk is limited by stop-loss, and the employer still carries the duties of a self-funded plan sponsor.
Self-Funded
You pay claims as they occur, with stop-loss above a chosen deductible, plus a TPA and other vendors. Monthly cost moves with claims. In return you gain flexibility, data and the chance to keep the savings. Read more on self-funded health plans.
Questions That Decide It
Could we absorb a bad month? Do we want claims data? Is our headcount stable? Would a refund change how we think about renewal? Our funding comparison calculator and funding options guide turn these into numbers.
Who tends to do well with level-funding, and who does not
Fit is a calculation, not an opinion. These are the patterns we see.
Often A Good Fit
Groups with stable or improving claims and a workforce that uses coverage predictably. Employers that want a steady budget with some of the upside of self-funding. Groups whose insured renewals keep rising faster than their own claims suggest they should.
Often Not A Good Fit
Groups with a known, ongoing high-cost claimant, since pricing, lasering or declination can erase the savings. Employers with seasonal or unstable headcount. Employers that cannot tolerate any year-to-year variation in cost. These are warning signs, not automatic disqualifiers, so a short review of the group’s claims and headcount pattern is worthwhile before deciding.
Worth A Closer Look
Groups near the fifty-employee line, where rating rules change. Groups with a young or healthy census that may be overpaying through community rating. These groups may have more to gain from a comparison. Whether it pays off depends on actual claims and quotes, so employers should look at the numbers side by side before changing funding.
Run The Numbers First
We compare level-funded quotes against your insured renewal before recommending anything, and we show the downside as well as the upside. Whoever prepares the comparison, employers should insist on seeing the same assumptions on both sides: the same plan design, the same effective date and the realistic worst case. A comparison that shows only the best outcome is not enough for a funding decision.
Level-funded still means you are a plan sponsor
A level-funded plan looks like insurance, but legally it is a self-funded health plan. That changes what the employer owes.
ERISA Plan Documents
A written plan document and a summary plan description are required, and a carrier certificate of coverage is not the same thing. Ask whether your carrier supplies a wrap document. See our guide on the SPD versus the benefits guide.
Form 5500
Plans with 100 or more participants file annually. Smaller plans are often exempt when benefits are paid from general assets, but the funding arrangement matters, so confirm before assuming. Because the filing rules depend on the plan’s structure and participant count, employers should ask their adviser or counsel whether a filing applies and who prepares it. Missing a required filing can bring penalties, so confirm early.
PCORI Fee
Self-funded plan sponsors, including level-funded ones, pay the annual Patient-Centered Outcomes Research Institute fee directly. In a fully insured plan the carrier pays it. Employers moving from fully insured to level-funded should add the fee to their list of new compliance tasks and ask who calculates and files it. The plan sponsor remains responsible, so confirm the process with the TPA, adviser or counsel.
ACA Reporting
Applicable large employers still file Forms 1094-C and 1095-C. For self-funded plans the 1095-C also reports coverage for enrolled individuals, which the carrier or TPA may prepare for you under the contract. Employers should ask who will prepare and distribute the forms, what data they need from payroll, and what the deadline is. Because the rules are technical, a tax adviser or counsel should confirm the filing responsibilities for the specific plan.
Consolidated Appropriations Act Duties
Gag clause attestations, prescription drug data reporting, mental health parity analyses and compensation disclosures all apply in some form. Who files what is assigned in the contract, so ask your carrier or TPA in writing. See our compliance calendar.
Nondiscrimination And State Law
Self-insured plans can face tax-code nondiscrimination rules that insured plans do not, covered in our testing guide. They are generally exempt from many state insurance mandates under ERISA, while the stop-loss policy is regulated as insurance. See ERISA preemption.
General information, not legal advice. Plan-specific questions belong with ERISA counsel, and we will bring them in.
What to ask before you sign a level-funded proposal
Two proposals with the same monthly payment can carry very different risk. These are the questions that separate them.
Is The Aggregate Built Into The Payment?
Confirm that your annual cost is capped at the quoted payment, and ask what happens to the cap if enrollment changes. Employers should read the contract wording to see how the aggregate attaches, whether it runs over a stated period, and what could change the figure. A written answer from the carrier is better than a summary in a sales deck.
What Is The Specific Deductible, And Is Anyone Lasered?
A low payment with a high or individual deductible can hide a large uncovered exposure. Ask for every laser by name and amount. A laser is an individual whose expected claims are carved out at a higher deductible, so the employer carries that cost directly. Employers should ask how the exposure would be funded if the lasered claim materialized, and whether it can change at renewal.
What Is The Contract Basis?
Stop-loss contracts cover claims incurred and paid within stated windows, such as twelve months incurred and fifteen months paid. The windows decide what is covered when claims arrive late. Employers should compare the windows on every quote, since a shorter paid window can leave late-billed claims uncovered. Ask the carrier to explain in plain language how a claim from the last months of the term would be treated.
What Are The Refund Terms?
Ask what share of a surplus comes back, when it is calculated, and whether runout claims are counted first. Employers should not count on a refund when budgeting, since it depends on claims and on the contract language. Ask for the formula in writing and for examples of how it has worked, without assuming past results will repeat.
Who Pays Runout If We Leave?
Find out what happens to claims incurred before termination but paid after, and whether you owe anything for them. Employers should compare this answer across quotes, because the cost of runout can matter when a group changes carriers or funding. Ask how long the runout period lasts and who administers those claims after the plan ends.
Is There A Renewal Cap Or Guarantee?
If so, what it costs and what conditions apply. If not, assume renewal will follow your experience. A guarantee can reduce uncertainty but may come with trade-offs, such as a higher starting rate or conditions on enrollment. Employers should compare quotes with and without a guarantee, then decide how much stability is worth to the budget.
What Network And Pharmacy Terms Apply?
Confirm which network is used and whether pharmacy benefit fees, rebates and specialty drug programs sit inside the administration fee or outside it. Employers should ask for the fee schedule in writing and check which charges are fixed and which depend on usage. Pharmacy terms can move total cost as much as the headline premium, so they deserve the same scrutiny as the medical network.
What Reporting Do We Get?
Monthly claims reports are how you spot trouble early. Ask what is included, how often it arrives and who owns the data. Employers should ask whether reports are sent automatically or only on request, and whether the data can be shared with a new carrier or adviser later. Reports are most useful when someone reviews them regularly and follows up on trends.
How we evaluate level-funded options for Michigan employers
We follow the same process we use for every renewal, described on our DATUM page.
1. Collect The Facts
Census, current plan design, the renewal in hand and claims experience if it is available. The more complete the information at the start, the more accurate the quotes will be. Employers should gather the recent renewal letter, a current employee census and any available claims reports before approaching the market, and tell the adviser about known upcoming changes.
2. Take It To Market
We approach level-funded and other funding programs alongside fully insured carriers, so the comparison is real. A real comparison means each option is quoted on the same plan design and effective date. Employers should ask to see the assumptions behind every quote so that differences reflect pricing and not mismatched benefits.
3. Model The Range
Expected, best-case and worst-case outcomes, set next to your insured renewal. The range matters because level-funded outcomes depend on claims, so a single projected figure can mislead. Employers should look at what they would pay in a poor claims year as well as a good one, then decide whether that exposure is acceptable.
4. Negotiate And Implement
Deductible, aggregate, refund terms and contract basis are all open to negotiation. Once you decide, we manage enrollment and the plan documents with you. Employers should also confirm who handles each task once the plan is chosen, including employee communications, eligibility, and the plan documents. Writing down responsibilities and deadlines early helps the enrollment go smoothly and avoids last-minute gaps.
5. Monitor And Renew
Claims reports are reviewed through the year, so the renewal is never a surprise. Employers benefit from a regular check-in on how claims are trending against the plan, rather than waiting until the renewal date. Early awareness gives time to explore options, ask questions of the carrier and plan communications to employees.
Common questions
Is a level-funded plan the same as fully insured?
No. It feels similar because the monthly bill is steady. But it is a form of self-funding, and it comes with its own federal ERISA duties. We help keep you ERISA compliant. Those duties include a plan document, a summary plan description and, at 100 or more participants, a Form 5500. The contract also decides who pays claims incurred before it ends but paid after.
Can employees keep their doctors?
Often, yes. Many level-funded plans use a large carrier network. We check the network against your employees’ doctors before you switch. We check by name and location, for the doctors and hospitals your employees actually use, rather than relying on a general statement that the network is large. Where a level-funded option rents a different network from the carrier’s fully insured plan, the differences show up here.
Do you work with employers outside Bloomfield Hills?
Yes. We help with level-funded health plans in Bloomfield Hills, Troy, Novi, Rochester Hills and across the whole state of Michigan. We also work with employers outside Michigan from our Colorado Springs and Houston offices, with the same level-funded plan analysis and stop-loss review.
How much can we save with level-funding?
It depends on your group’s claims compared with your insured rate. A group healthier than its insured pricing assumes may see a lower total cost, plus a refund. A group with higher claims will not. We compare quotes to your actual renewal rather than quoting an average.
What happens if one employee has a very large claim?
Specific stop-loss pays above the deductible, so your cost on that person is limited to the deductible. The catch is renewal: that claim can raise your pricing or lead the carrier to laser the person at the next renewal.
Do we need a minimum number of enrolled employees?
Yes. Carriers set minimum participation and employer contribution, and they treat waivers for other coverage differently. We confirm the rules before you commit.
Is a level-funded plan ACA compliant?
It must meet the ACA rules that apply to all plans, including preventive care without cost sharing, no annual or lifetime dollar limits on essential benefits, an out-of-pocket maximum and dependent coverage to age 26. It is exempt from the small group rating and essential health benefit rules that apply to fully insured small group plans.
Can we add employees during the year?
Generally yes under the plan’s normal eligibility rules, and the monthly payment adjusts with enrollment. Carriers may underwrite late applicants, so ask how they handle them.
Is level-funding right for a very small group?
Some programs accept very small groups, but with fewer people one claim moves the result more. We check whether the deductible and underwriting make sense at your size before recommending it.
How is a level-funded plan different from a self-funded plan with a TPA?
A level-funded plan packages administration, stop-loss and expected claims into one fixed monthly payment, usually with one carrier. A self-funded plan with a TPA lets you choose each vendor and pay claims as they occur, so cost moves with claims. Level-funding is simpler to budget, and self-funding gives more control. See self-funded health plans.
What happens to the refund if we leave before the plan year ends?
Refund terms are set by the contract. Most programs calculate any refund after the plan year closes and claims have run out, so leaving early can reduce or forfeit it. Ask what happens to the refund and to runout claims before you sign.
Are prescriptions and specialty drugs covered?
Yes, pharmacy is part of the plan. A single specialty drug can become one of your largest claims, so ask how the program manages specialty drugs and how those claims count toward the stop-loss deductible.
Can a level-funded plan be paired with an HSA?
Yes, if the plan is designed as an HSA-qualified high-deductible health plan. The deductible and out-of-pocket limits have to meet IRS rules, so confirm the design with the carrier before enrollment.
How early should we start looking before our renewal?
Earlier than most employers expect. Stop-loss underwriting and plan setup take time, and a late start narrows the programs that can quote. Send us your renewal as soon as you have it, or sooner if you can estimate the date.
Talk to us about level-funded health plans in Bloomfield Hills
Send us your renewal or book a 30-minute call, and we will show you whether level funding fits. Our office is at 41000 Woodward Avenue, Suite 350 East, Bloomfield Hills, MI 48304. Call 248.370.8853.
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Related guides.
Association Plans and MEWAs
How multi-employer health arrangements work and the questions to ask before joining.
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
ERISA (29 U.S.C. Chapter 18)
The federal law that sets reporting, disclosure and fiduciary rules for employer-sponsored benefit plans.
Affordable Care Act (Public Law 111-148)
The 2010 health reform law, with later amendments, behind employer coverage, reporting and market rules.
ACA Reporting (26 U.S.C. 6056)
The statute behind employer reporting of offers of coverage on Forms 1094-C and 1095-C.
Health Savings Accounts (26 U.S.C. 223)
Tax rules for health savings accounts paired with qualifying high-deductible health plans.
Plan Reporting (29 CFR Part 2520)
The Department of Labor rules for annual plan reports, including Form 5500.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
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