The plan-funding choice is no longer two-way. Here is how fully insured, level-funded and self-funded actually compare for a Utah employer between 50 and 500 employees — with the KFF numbers and the regulatory change nobody mentions.
For most Utah employers between 50 and 500 employees, the honest answer is that the choice is no longer two-way. Fully insured, level-funded and self-funded are three distinct structures, and the middle one is where a large share of mid-size employers have actually landed. The right structure depends on your claims history, your cash reserves and how much plan control you want.
When most employers think about their health plan, they think about the carrier name on the insurance card. They do not think about the funding structure underneath it — and that gap is where a lot of money quietly goes.
What is the difference between fully insured, level-funded and self-funded plans?
The difference is who holds the claims risk and who keeps the money when claims come in low. In a fully insured plan the carrier holds the risk and keeps the surplus. In a self-funded plan you hold the risk and keep the surplus. A level-funded plan is a self-funded plan wrapped in a fixed monthly payment.
| Fully insured | Level-funded | Self-funded | |
|---|---|---|---|
| Who pays claims | The carrier | The employer, from a funded claims account | The employer, as claims occur |
| Monthly cost | Fixed premium | Fixed monthly amount | Varies with claims |
| Surplus if claims are low | Kept by the carrier | Refunded to the employer, per contract | Kept by the employer |
| Claims data access | Limited, aggregate, usually at renewal | Generally included | Full, ongoing |
| Catastrophic protection | Built into the premium | Stop-loss, bundled | Stop-loss, purchased separately |
| Primary regulator | Utah Insurance Department and federal law | Mixed; depends on the arrangement | Federal (ERISA); exempt from state insurance regulation |
How common is each structure at a company our size?
Self-funding is the majority structure overall but not at every size. In the KFF 2025 Employer Health Benefits Survey, 67% of covered workers are in a self-funded plan — but that splits sharply: 27% at firms with 10 to 199 workers against 80% at firms with 200 or more.
The band that matters most to a growing Utah employer sits between those two numbers. The same KFF survey puts firms with 200 to 999 workers at 57% self-funded, against 82% at 1,000 to 4,999 and 87% at 5,000 or more. In other words, at your size self-funding is common but genuinely optional — it is the last size band where the decision is still live.
Level-funding is what filled the gap underneath it. KFF reports that 37% of covered workers at firms with 10 to 199 workers are in a level-funded plan, and that 51% of covered workers at those smaller firms are now in a plan that is either self-funded or level-funded — up from 19% in 2018.
One regional number worth knowing
Self-funding is less common in the West than anywhere else in the country. KFF puts the West at 53% of covered workers in self-funded plans, against 77% in the Northeast, 72% in the Midwest and 67% in the South. If you are a Utah employer who has never seriously modelled self-funding, you are in the majority regionally — which is a reason to check the math, not a reason to assume the market has already decided for you.
What does self-funding change about who regulates your plan?
This is the consequence most comparisons skip, and it is not a technicality. When you self-fund, your plan leaves the Utah Insurance Department's jurisdiction. Federal ERISA rules take over, and your employees' escalation route changes with it.
The Utah Insurance Department states this directly: “Federal law exempts self-funded employer plans from state insurance regulation. This means that our office can only offer advice and will generally have no authority over such plans or their administration.” The department directs employees covered by a self-funded plan to the federal Employee Benefits Security Administration instead.
For an employer, that cuts both ways. You are no longer bound by Utah-specific benefit mandates, which is part of the appeal for multi-state employers. But you also become the place the complaint lands, and you carry the fiduciary duty that goes with it. If a claim is denied and an employee is unhappy, the state is not going to resolve it for you.
Two practical follow-ons. Utah licenses third-party administrators, so you can verify that any TPA you are quoted is licensed in the state before you sign. And the IRS notes that an employer sponsoring self-insured coverage has information reporting responsibilities as a provider of minimum essential coverage whether or not it is an applicable large employer — a reporting obligation that a fully insured employer does not carry.
How much stop-loss protection do self-funded employers actually buy?
Most of them buy it, and at your size you should assume you will. KFF reports that among firms with 200 or more workers, 75% of covered workers in self-funded plans are in plans carrying stop-loss insurance. It is the mechanism that makes self-funding survivable for a mid-size employer.
Stop-loss insurance caps your exposure in two places: a specific attachment point that limits what any one claimant can cost the plan, and an aggregate attachment point that limits total plan spend for the year. Those two numbers, and how the carrier treats a known high-cost claimant at renewal, matter more to your downside than the headline savings projection does. We go through the mechanics, including lasering, in our guide to stop-loss insurance for Utah employers.
Which structure is right for a 50 to 500 employee company?
There is no structural answer — only a modelled one. The question is not whether self-funding is cheaper in the abstract, but whether it is cheaper for your claims history after TPA fees, stop-loss premiums and run-out reserves, and whether a bad year is survivable.
Self-funding tends to make sense when:
- You have two to three years of usable claims history and a reasonably stable population
- You hold enough cash to absorb month-to-month claims variability without straining operations
- You are prepared to manage the plan actively rather than accept a renewal each year
- You want the claims data, and you intend to act on it
Fully insured or level-funded tends to make sense when:
- A single bad claims year would genuinely hurt the business
- Your population is small enough that one catastrophic claimant swings the result
- You do not yet have the internal resources or advisor support to run a self-funded plan
- You want the surplus upside without the cash-flow variability — which is precisely the level-funded trade
Level-funding deserves more credit than it usually gets in this comparison. It is a genuine stepping stone: you get the fixed monthly payment, generally get the claims data, and get a refund of unused reserve if the year goes well. For a first-time move off fully insured, it is usually the lower-risk version of the same decision.
What should we ask for before deciding?
Ask for all three modelled side by side against your own claims, not against a benchmark. A comparison built on industry averages tells you what an average employer should do. You are not modelling an average employer.
A credible feasibility analysis should include 24 to 36 months of medical and pharmacy claims, specific and aggregate stop-loss quotes with the attachment points named, an expected-case and a worst-case annual cost, the reserve you would need to hold, and the full vendor stack — TPA, PBM, network and stop-loss carrier — priced separately rather than bundled into one number. If the projection arrives as a single savings percentage with no worst case attached, it is a sales document, not an analysis.
Treat any quoted savings figure as a hypothesis until it has been tested against your own claims file. That applies to figures you hear from us as much as from anyone else.
What to do next
If you are heading into a renewal and you cannot say what is driving your healthcare spend, the structure of your plan is part of the reason. That is a solvable problem, and the first step is modelling all three options honestly against your own data rather than accepting the one you already have.
We do this work for employers across the Wasatch Front, including Salt Lake City and the surrounding valley. If you want a straight read on whether your group is a candidate — including the case for staying where you are — get in touch and we will walk through it with you.
Related reading: how to evaluate a health plan renewal increase, what the ACA employer mandate requires of a Utah employer (including the reporting duty self-funding adds), and our glossary entries on self-funded health plans, level-funded health plans and fully insured health plans.
Tyson has specialized in employee benefits since 2010, helping C-suite executives and HR leaders build custom health plans that reduce costs and improve employee access to quality care.
Skyler partners with Utah employers to design strategic, data-driven employee benefits programs that align financial outcomes with workforce wellbeing — bringing the same boardroom-level thinking featured in Healthcare's C-Suite Solution to every engagement.