Level-funded vs fully insured: how to check what an employer has

What is the difference between level-funded and fully insured?

Fully insured, level-funded and self-funded are three different products, and you cannot tell which one an employer has from the name of its carrier. The Department of Labor's 2025 reporting instructions define a fully insured welfare plan as one whose benefits come exclusively through insurance contracts or policies, with premiums paid directly to the insurer. In a self-funded plan, KFF says, the employer pays for enrollees' care "directly from their own funds rather than through the purchase of health insurance." A level-funded plan sits in between: KFF's 2025 Employer Health Benefits Survey describes it as "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."

The figures come from that single annual employer survey: 1,862 non-federal public and private employers with ten or more workers, fieldwork January to July 2025, published October 22, 2025. In 2025, 67% of covered workers were in self-funded plans, including 27% at firms with 10 to 199 workers and 80% at larger firms. Separately, 37% of covered workers at firms with 10 to 199 workers were in a level-funded plan, which KFF called similar to 2024. That is a share of covered workers at those firms, not a share of small firms.

Don't add the 27% and the 37% together. KFF calls level-funded arrangements "nominally self-funded", asks small firms that describe their plan as fully insured whether it is level-funded, and notes that some small employers that say they are self-funded may also have a plan that fits the level-funded definition. The two groups overlap, so a sum counts some workers twice.

KFF also says why the difference matters: unlike insured plans, level-funded plans "use health status in rating and underwriting, and are not required to provide all of the essential health benefits that are mandatory for insured plans." So a move between funding types is a real decision, and funding type decides whether an employer fits what you sell before anyone takes a call. This page does not tell employers which to choose.

Why a carrier's name does not tell you the funding type

Don't read funding from the carrier column. One large carrier can sell fully insured plans, level-funded plans and administration for self-funded employers, so the name on an employee's ID card tells you who handles claims, not who carries the risk.

The employer's own answer needs care too. KFF says that because level-funded employers often pay a monthly amount that resembles a premium, respondents "may be confused as to whether or not their health plan is self-funded or insured", and that insurers use different labels for these arrangements. So skip "are you self-funded?" and ask how the plan works: who pays the claims, whether there is stop-loss and who holds it, whether there is a reconciliation with the insurer at year end, and when the arrangement last changed.

Example (invented): a 70-person veterinary group whose employees carry a national carrier's cards. Your list says fully insured because that carrier mostly sells insured plans. On the first call, the CFO calls the plan insured, then mentions a flat monthly payment that gets reconciled with the insurer at year end. That points to a level-funded arrangement. Note it as the CFO's description and confirm it before anyone prices against it.

The honest funding check has two acceptable answers: evidence about the plan itself, or the employer's word, asked in plain terms. Anything else is a guess, and unknown funding goes to research, not to a producer. The broader fit checks sit in our guide to employee benefits sales.

What the public annual report does not show about funding

The Department of Labor's 2026 Report to Congress on self-insured group health plans is direct about the first gap: "The Form 5500 does not explicitly disclose whether a health plan is self-insured." And DOL's 2025 instructions say stop-loss an employer buys for itself, with no employee contributions, generally is not a plan asset and is not reported on the form's insurance schedule, which is why the same report says the forms "often understate the use of stop-loss insurance."

That is how a level-funded plan can look fully insured from the outside: a premium-like monthly payment, an insurer's name, and stop-loss that may not show up at all. For what the form does show, who submits one and when, read our guide to the annual report and its limits.

This section is context about a public form and federal reporting rules, not legal or compliance advice. Check the rule's own text and your counsel before relying on it.

How do I know if an employer uses a PEO?

PEO status decides fit as much as funding does. Many brokers do not work with employers on a PEO, and a request for proposals led by the employer's PEO is out under a no-PEO rule. The PEO column is often the least reliable one on a list, so four checks keep it honest. When in doubt, ask the employer whose tax ID its payroll runs under and who sponsors its health plan.

• A payroll or HR software name is not a PEO.
• A PEO tag can be old. Employers join and leave PEOs, and a tag carried forward from an earlier year proves only that someone once recorded it.
• HR and payroll run under the employer's own tax ID is not a PEO, even when an outside firm does the work.
• "Not found" is not "no PEO". A blank PEO field means nobody confirmed it, so it stays unknown until the employer or the evidence says otherwise.

When is a PEO exit or a funding change a real reason to buy?

A PEO exit or a funding change is not enough on its own. The version that holds up is pressure tied to a dated review: a PEO exit, a group nonrenewal, a renewal increase, a participation shortfall or a budget gap, together with evidence that the employer has set a time to decide. That supports an approach. It does not prove interest in any particular product, whether that is level funding, a new fully insured carrier or an ICHRA.

Why do employers leave a PEO? Each employer has its own reasons, and this guide does not cite a national count of them because we found none we would stand behind. What a seller can rely on is narrower: if an employer's benefits ran through the PEO, leaving means it has to decide how to provide them afterward, and that decision has an owner, usually in finance or HR, and a date to find.

Funding changes work the same way. An employer that asks to compare funding options is a stronger moment than general cost pressure, and much stronger than fit alone (a small employer, a team spread across several states). Our guide to benefits buying signals ranks the moments and states what each one does not prove.

The opposite trap: an employer that just renewed, just changed funding or just chose a new broker has made its decision for this cycle. Treat it as closed unless the employer says otherwise.

Funding and PEO checks: what counts as proof

Run these before an employer reaches a producer. A failed check means research, not a call.

How Clean handles funding type and PEO status

Clean finds employers with a real reason to review their benefits, shows the evidence behind each one, and names the people who own the decision. When Clean cannot confirm something, such as the funding type, PEO status or whether a new broker is welcome, it marks it unknown instead of guessing. Clean also flags accounts to drop: a decision that already closed, a deadline that passed, an employer on a PEO, or a record that turns out to be the wrong company.

You tell Clean which employers to look for by size, region, industry and funding, and who to leave out, such as current clients and open opportunities. Clean can research the employers already on your own list, a book of business or a target list, as well as find new ones. It does not need employee health records, census files or claims data.

Clean's own internal database goes well beyond Form 5500 filings.

See how fit is scored in ICP scoring, or start from the insurance overview. Then book a demo to see employers in your market with an open benefits decision, the evidence behind each one, and who owns it.