Small & mid-size groups · Stop-loss protected
Level-funded health plans for Michigan employers
A set monthly cost, claims data you can actually see, and a possible surplus if claims run low. Here’s how level funding works and the contract terms to check.
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- 37% of small-firm workers (KFF)
- Stop-loss protected
- Claims reporting
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What a level-funded plan is
You pay a set amount each month. Behind that payment are three parts: a fund that pays claims, stop-loss insurance that caps your exposure, and administration. Legally it’s a self-funded plan with a small self-funded component. KFF describes level funding as combining “a relatively small self-funded component with stop-loss insurance, which limits the employer’s liability and transfers a substantial share of risk to insurers.” [KFF 2025 Employer Health Benefits Survey]
37%of covered workers at firms with 10–199 employees were in a level-funded plan in 2025, similar to 2024. [KFF 2025]
How it differs from a fully insured small-group plan
- Underwriting: level-funded plans use health status in rating; ACA small-group plans can’t. Healthier groups often see better pricing; groups with known large claims often don’t qualify. [KFF 2025]
- Benefits: level-funded plans aren’t required to cover every essential health benefit that insured small-group plans must. Check what’s in and out.
- Data: you usually get claims reporting, which fully insured small groups rarely see.
- Surplus: some contracts return or credit part of an unused claims fund; others keep it for reserves or apply it to renewal. Read the settlement terms.
Questions to ask before you sign
- How is the monthly cost split between claims fund, stop-loss and fees?
- What happens to a surplus, and when? Is it a refund, a credit, or retained?
- What’s the stop-loss contract basis, and who pays claims incurred before termination but paid after (run-out)?
- Can the stop-loss carrier set a higher deductible for one person at renewal (“lasering”)? Is there a renewal rate cap?
- Which network and pharmacy benefit manager, and does your team’s care stay in network?
- Which essential health benefits are excluded, if any?
- If claims run high, what will year two look like, and can you return to the fully insured market?
- Who handles compliance filings? For example, every group health plan must submit the federal gag-clause attestation by December 31, 2026. [CMS]
When level funding tends to fit
- A generally healthy group that meets the carrier’s underwriting
- Fully insured for a few years with climbing renewals
- Leadership willing to look at claims data
- Comfort with some year-to-year variation for the chance of a surplus
When it usually doesn’t
- Known large ongoing claims
- A need for zero variability
- Very small groups that don’t meet underwriting
Compare against the 2027 alternatives
Fully insured small-group renewals: Michigan insurers requested an average 9.6% for 2027 (proposed, subject to DIFS approval). See the insurer table on our 2027 renewal audit page. Other routes: ICHRA and, for groups of 50 and up, full self-funding with stop-loss.
More: Nexus level-funded solutions and ICHRA vs. level-funded.
2-minute advisor Q&A
Level funding explained
A Nexus advisor answers the questions we hear most. (Video coming soon.)
- How is level funding different from fully insured?
- What happens in a bad claims year?
- What should I check in the surplus terms?
Frequently asked questions
What is a level-funded health plan?
A self-funded plan with a set monthly payment that covers a claims fund, stop-loss insurance and administration. KFF reports 37% of covered workers at firms with 10 to 199 employees were in level-funded plans in 2025.
Is level funding cheaper than a fully insured plan?
Not automatically. Level-funded plans are underwritten using health status, so healthier groups may price better, and some contracts return a surplus. Groups with large claims may pay more or not qualify. Compare actual quotes, contract terms and benefits.
Can a small business in Michigan get a level-funded plan?
Many carriers and administrators offer level-funded plans to small groups, subject to their own size and underwriting rules. We check what's available for your group size and census.
What happens if our claims are high?
Stop-loss insurance caps your exposure for the contract year, but high claims usually affect the next renewal, and stop-loss terms like lasering can change. Ask about renewal caps and your options to return to the fully insured market.
Do level-funded plans have to cover essential health benefits?
They aren't required to cover all of the essential health benefits that insured small-group plans must, according to KFF. Review the plan document for exclusions before you switch.
Will you sell my information?
No. It goes to one licensed Michigan advisor at Nexus and is never sold.
Where are you on the benefits ladder?
Keep exploring
Small-business pages by region
- Grand Rapids · Kent & Ottawa
- Detroit metro · Wayne, Oakland & Macomb
- Lansing · Ingham, Eaton & Clinton
- Ann Arbor · Washtenaw
Buying coverage for yourself or your family? See Michigan Open Enrollment 2027.