Fully insured, level funded, self-funded, or captive. Which is right for us?

Every health plan answers one question: when an employee gets sick, whose money pays the claim? Your funding arrangement is the answer, and it shapes everything else, from what you pay to what you get to see.

Think of it as a ladder. Each step up gives you more control and more information, in exchange for taking on more of the risk.

Fully insured. The carrier pays claims and you see very little. If claims run low, the carrier keeps it. Usually fits smaller or high-risk groups.
Level funded. You pay claims with stop loss behind you, at a fixed monthly cost. You get some claims reporting, and a surplus is often refunded or credited. Most common under 200 employees.
Self-funded. You pay claims as they happen with stop loss behind you. You see everything and keep every dollar you don't spend. Roughly 100+ employees with stable cash flow.
Group captive. You self-fund, but share a middle layer of claims with like-minded peers, with a reinsurer on top. You see everything, and you and the captive share the surplus.

I am not going to tell you there is one right answer, because there isn't. A 60 person engineering firm and a 450 person PE-backed manufacturer need different things. What I will do is run your last few years of claims through each option so you can see the actual numbers before you decide.

Questions to ask

Do we receive monthly claims and large-claimant reporting today? If not, why not?
What would our last three years have cost under level funding or self-funding?
How much volatility can our cash flow absorb in a bad month?

How do I compare two level funded quotes?

Look past the monthly rate. Check how much of the premium goes into the claims fund (some carriers put about 50 percent there, others 60 to 70 percent) and how much of any unused surplus comes back to you (50, 67, or 100 percent). Two plans with identical rates can be hundreds of thousands of dollars apart on those two numbers alone.

Should we self-fund through a big carrier or an independent TPA?

A carrier ASO bundles the network, PBM, care management, and often stop loss into one vendor, which means strong network contracts and simplicity but less flexibility and less data. An independent TPA lets you pick each piece separately and gives you full claims data, with more moving parts. Spread-out workforces that want simplicity usually fit a carrier. Concentrated workforces that want control usually fit a TPA.

What is a group captive, and who is it for?

A group captive lets a set of like-minded self-funded employers share a middle layer of risk. Each employer pays its own smaller claims, the captive pools the mid-size claims across members, and a reinsurer covers the catastrophic layer. It is self-funding with less volatility, and it works best for employers committed to managing cost.