Minimum premium plans: a middle path between insured and self-funded.
A minimum premium plan splits the work. The employer pays claims from its own funds up to a set level, and the carrier covers claims above it and handles the plan. It sits between a fully insured plan and a self-funded plan with separate stop-loss.
How the arrangement is built.
Two Pieces of Funding
The employer funds claims up to an agreed level. The carrier bears claims above it and charges a smaller premium to cover that risk and its administration.
The Carrier Stays the Insurer
Unlike a self-funded plan with separate stop-loss, the carrier is on the risk and issues the contract. The employer owns the claims funding behind it.
Claims Fund Is Employer Money
The employer typically funds claims through an account, and the carrier draws on it as claims are paid. What is left unspent stays with the employer.
The Insured Premium Is Smaller
The reduced premium can lower premium tax and reserve loading that an insured premium would carry. Whether it does depends on state rules and the contract.
It Is Less Common Today
Level-funded plans and ASO with stop-loss have taken much of the market. Minimum premium plans still exist and suit some employers.
Regulatory Treatment Depends on the Contract
Whether state law treats it as insured or self-funded, and how it is reported, depends on the contract. Confirm with counsel before you rely on any one treatment.
How it differs from the other structures.
The goal is to see where the risk and the money actually sit.
Versus Fully Insured
You fund part of the claims instead of paying a full premium, so your cash flow and your upside change.
Versus Self-Funded With Stop-Loss
The carrier’s insurance sits inside one contract, not in a separate stop-loss policy bought alongside an administrator.
Versus Level-Funded
Level-funded is a fixed monthly payment built on a self-funded structure. Minimum premium has a variable claims component you fund.
Cash Flow
Because you fund claims as they are paid, you need cash on hand and a plan for months that run high.
Reporting and Data
Ask what claims reporting the carrier gives you. It should be enough to manage the plan.
Exit
Leaving may mean claims run-out, and ending the arrangement is a financial event. Read the termination terms.
How we evaluate one.
Model the Funding Split
We model the claims level the employer funds and the carrier covers, then test it against a bad year.
Compare It to Alternatives
We price minimum premium next to fully insured, level-funded and self-funded options on the same census.
Confirm the Treatment
We ask counsel and the carrier how the arrangement is treated for state law and reporting before it goes live.
Three questions to settle.
Where Is the Claims Fund Held?
Ask who holds the funds, who can draw on them and how unspent money is returned.
What Is Our Maximum Cost?
Get the largest amount you could owe in a year, in writing, including claims funding and premium.
How Is This Plan Treated Under State and Federal Law?
Ask the carrier and your counsel to confirm the treatment and what it means for filings.
Common Questions About Minimum Premium Plans
Is a minimum premium plan self-funded?
It is partly self-funded. The employer funds claims up to a level, and the carrier insures the rest. How the law treats it depends on the contract.
Is it available for small groups?
Availability varies by carrier and by group size. We check who will quote your group.
Who pays claims above the agreed level?
The carrier does, under the insured portion of the contract.
Do we need separate stop-loss?
Usually not, because the insurance for higher claims is part of the contract. Confirm this in the quote.
Does CFH place minimum premium plans?
We evaluate and advise on them alongside our other funding options, and we will tell you where another structure fits better.
How do I know if it beats level-funding?
We run both on the same census. The better structure depends on your claims, cash flow and the quotes in front of us.
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.
Laws and rules referenced
29 U.S.C. § 1144(b)(2) — How state insurance regulation applies to insured and self-funded arrangements.
29 C.F.R. § 2520.104-20 — Limited exemption from Form 5500 reporting for certain small welfare plans.
This page is general information, not legal, tax or actuarial advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
An independent employee benefits consulting firm. We look at the entire benefits program: cost, plan performance, risk and administration.
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