Which funding type is the right fit for your organization?

If predictability matters most to your business, fully insured plans may be the right fit. Here's how they work:

• Your business pays a fixed monthly premium to an insurance carrier
• The carrier then assumes all the risk for employee health claims, which offers protection when unexpected health costs arise

The fully insured model offers predictability and simplicity, making it ideal for risk-averse organizations that prefer a hands-off approach, where the carrier assumes the risk. While fully insured plans are typically less customizable than their self-funded counterparts, at UnitedHealthcare, there are still customizations that employers can make.

A fully insured plan also works well for smaller businesses that may not have the internal resources to manage health benefits, as the insurance carrier handles all administrative tasks and compliance requirements.

Self-funded plans offer greater control and flexibility, but they require careful consideration of risk tolerance. Here's what to know:

• In a self-funded model, the plan sponsor assumes the financial risk of paying for plan participant health claims directly
• While this arrangement may lead to cost savings if plan participants have fewer health claims, it may be a riskier arrangement if high-cost or unexpected claims come in

Self-funding isn't limited to large employers. Today, 63% of covered workers are enrolled in self-funded plans — including 20% at small firms and 79% at large firms.³

These plans, which are typically more popular with larger organizations, may require a more hands-on approach and greater management resources. With a self-funded health plan, plan sponsors also have more flexibility in designing benefits to meet the specific needs of their workforce, which may help contribute to better outcomes. Yet, small businesses may need to be prepared for potential high-cost claims — and have a strategy in place for managing these risks, such as purchasing stop loss insurance, which protects employers when catastrophic claims come in.

Level funded plans are gaining momentum among employers looking for a middle path. In 2024, 42% of small firms chose this option — up from just 7% in 2019.⁴ Here's why: These plans represent a hybrid model where the risk is shared between the plan sponsor and the carrier. For instance:

• Your business would make fixed monthly payments, offering similar predictability to a fully insured plan
• If claims come in lower than expected at the end of the plan year, the plan may receive a potential surplus refund, mitigating some of the risk of overpaying⁴

Notable is that plan sponsors may pay 22% less on average under a UnitedHealthcare Level Funded plan compared to a fully insured plan.⁵

For many plan sponsors, this option provides a balance of predictability and potential cost savings, with less risk than a self-funded plan but more involvement than a fully insured plan. With increased national health spending projected, predictable funding approaches may help employers manage ongoing cost pressure but could leave them missing out on savings opportunities.