How does Service 1st Benefits support my business during open enrollment?

We personally manage the entire open enrollment process — from educating employees to handling enrollment forms and answering plan questions. Our goal is to make open enrollment smooth and stress-free for everyone.

Can employees contact you directly for help?

Yes. Employees can reach out to us anytime for questions about claims, coverage, ID cards, or plan details. We act as your team’s benefits partner, not just your broker.

What size businesses do you work with?

We specialize in serving small and medium-sized businesses, typically ranging from 1–200 employees. If you’re growing or planning to expand, we help scale your benefits as your team grows.

Do you handle communication with insurance carriers for us?

Absolutely. We take care of claims issues, employee changes, renewals, and any carrier communication so you don’t have to spend hours on hold.

Do you offer voluntary or supplemental benefits?

Yes. We can provide optional add-ons like disability, accident, or critical illness insurance to enhance your benefits package at little or no cost to the employer.

What types of group benefits do you offer?

We provide comprehensive group health, dental, vision, and life insurance options for small and medium-sized businesses. We help you compare plans, handle enrollment, and manage carrier communication.

What information do you need to provide a quote?

We typically need: Number of employees Basic employee census (age, gender, ZIP code) Current plan (if applicable) Desired benefits or coverage goals We keep the process as simple as possible.

Do you charge fees for your services?

No. Our services — including plan comparison, open enrollment, and year-round support — are provided at no additional cost to your business.

Level-Funded vs. Fully Insured Health Plans: Which Saves Small Businesses More Money in 2026?

Charlie Hopgood
Jun 1
4 min read

For many small business owners, health insurance is one of the largest operating expenses outside of payroll. As healthcare costs continue to rise, employers are looking for ways to provide quality benefits while maintaining control over their budgets.

One option gaining popularity among small and medium-sized businesses is the level-funded health plan. But how does it compare to a traditional fully insured plan, and which option is likely to save your company more money?

Understanding the differences can help you make a more informed decision during your next renewal.

What Is a Fully Insured Health Plan?

A fully insured health plan is the traditional health insurance model most employers are familiar with.

Under a fully insured arrangement, your company pays a fixed monthly premium to an insurance carrier. In exchange, the carrier assumes the financial risk for employee healthcare claims.

Whether employees have very few claims or extremely high claims during the year, your premium remains the same until renewal.

Advantages of Fully Insured Plans

Predictable monthly costs
Simple administration
Lower financial risk for employers
Familiar structure for most businesses
Easier budgeting

Disadvantages of Fully Insured Plans

Limited opportunity to benefit from lower claims
Annual premium increases can be significant
Less transparency into claims data
Employers pay carrier profit margins and certain taxes built into premiums

For many small businesses, fully insured plans provide simplicity and predictability. However, they may not always be the most cost-effective option.

What Is a Level-Funded Health Plan?

A level-funded plan combines features of both fully insured and self-funded health insurance.

Instead of paying a traditional premium, employers make a fixed monthly payment that typically includes:

Expected claims funding
Stop-loss insurance protection
Administrative costs

At first glance, the monthly payment often looks similar to a fully insured premium. The key difference is what happens if employee claims are lower than expected.

If claims come in below projections, the employer may receive a refund or credit at the end of the plan year.

This creates an opportunity to reduce overall healthcare spending while maintaining predictable monthly costs.

How Level-Funded Plans Work

Imagine a company with 25 employees.

The carrier estimates annual healthcare claims and calculates a monthly contribution amount. The business pays that amount each month just like a traditional premium.

If claims are lower than expected:

The employer may receive a surplus refund.
Renewal rates may be more favorable.
Total healthcare costs may be reduced.

If claims are higher than expected:

Stop-loss insurance protects the employer.
Costs above predetermined limits are covered.
The employer's monthly payments typically do not increase during the plan year.

This protection helps reduce the risk often associated with self-funded arrangements.

Potential Cost Savings of Level-Funded Plans

One of the biggest reasons employers consider level-funded plans is the opportunity for savings.

Potential savings can come from:

Lower Premium Equivalent Costs

Many businesses find that level-funded rates are competitive with traditional plans.

Claims Refund Opportunities

If employee claims are lower than projected, employers may receive a portion of

unused claims funds.

Reduced State Premium Taxes

In many situations, level-funded plans may avoid certain premium taxes built into fully insured products.

Improved Claims Transparency

Access to claims information can help employers make informed decisions regarding future benefits strategies.

When Level-Funded Plans Make Sense

Level-funded plans are often a good fit for businesses that:

Have between 10 and 100 employees
Maintain relatively healthy workforces
Want more control over healthcare spending
Are frustrated with annual premium increases
Want access to claims data and reporting

Employers that actively promote wellness programs and preventive care often see additional value from these plans.

When Fully Insured Plans May Be Better

Despite the advantages of level funding, fully insured plans remain the right choice for many organizations.

A fully insured plan may be preferable if:

Your workforce has significant ongoing medical conditions
You prefer maximum simplicity
You want the carrier to assume all claims risk
Your company is very small and wants the most predictable structure possible

Every business situation is different, which is why a detailed benefits analysis is important.

Common Misconceptions About Level-Funded Plans

"They're Too Risky"

Modern stop-loss protection significantly limits employer exposure.

"They're Only for Large Companies"

Many carriers now offer level-funded solutions designed specifically for small and medium-sized businesses.

"Administration Is Complicated"

Most level-funded plans are administered similarly to traditional health plans, making implementation relatively straightforward.

Questions to Ask Before Choosing a Plan

Before renewing your health insurance, consider:

How much did our premiums increase last year?
What is our employee participation level?
Have our claims historically been high or low?
Are we interested in greater cost transparency?
Would a potential refund benefit our organization?

The answers can help determine whether a level-funded arrangement deserves consideration.

The Bottom Line

There is no one-size-fits-all answer when choosing between level-funded and fully insured health plans.

Fully insured plans offer simplicity and predictability. Level-funded plans offer the possibility of savings, greater transparency, and more control over healthcare spending while maintaining protection against catastrophic claims.

For many small businesses, a side-by-side comparison reveals opportunities to reduce costs without sacrificing employee benefits.

If your organization is preparing for an upcoming renewal, reviewing both options could uncover significant savings opportunities that might otherwise be missed.

Need Help Evaluating Your Options?

At Service 1st Benefits, we help small and medium-sized businesses compare health plan strategies, evaluate costs, and identify opportunities to improve employee benefits while controlling expenses.

Contact our team for a no-obligation benefits review and discover whether a level-funded health plan could be a fit for your business.