Level-Funded vs. Fully-Insured Health Plans: The Complete Guide for Dallas Employers (2025 Edition)

 

By Bear Benefits – 30 Years Serving Small Businesses in Dallas, Richardson, and Plano

 

If you’re a small business owner or HR manager in the Dallas/DFW area, choosing the right health insurance model can make the difference between a stable budget and skyrocketing costs. Two of the most common approaches— Level-Funded and Fully-Insured —look similar on the surface, but they operate very differently when it comes to pricing, flexibility, and potential savings.

 

At Bear Benefits, we’ve been working with both plan types since the late 1990s—dating back to the days of Great West—and we’ve seen firsthand how the right choice can lower costs without sacrificing plan design or service. In some cases, Dallas employers have saved 30%–60% when moving from fully insured to level funded.

This guide breaks down both models in plain English, with Dallas-specific insights, cost comparisons, and real-world pros and cons so you can make an informed decision.

 

What is a Fully-Insured Health Plan?

 

A Fully-Insured Plan is the traditional model most businesses start with:

• You pay a fixed monthly premium to an insurance carrier.
• The carrier takes on all claims risk, meaning they pay all covered claims.
• Premiums are based on group size, demographics, and claims history.
• At renewal, the carrier adjusts your rate based on overall performance.

Key Point for Dallas Employers:

 

Fully-insured plans are predictable but often come with year-over-year increases, especially in DFW industries like construction, hospitality, and healthcare, where claims can be higher.

 

What is a Level-Funded Health Plan?

 

A Level-Funded Plan is a hybrid between self-funding and fully-insured:

• You pay a “level” monthly amount, which covers:
1. Claims funding(money set aside for employee medical claims)
2. Stop-loss insurance(protection against high claims)
3. Administrative fees(plan management)
• If claims run lower than expected, you may get a refund or credit at renewal.
• If claims run higher, stop-loss insurance kicks in to protect your business.

Key Point for Dallas Employers:

 

Level-funded plans often have lower monthly costs compared to fully insured plans, especially for healthy, younger workforces. We’ve seen small businesses in Dallas save up to 60% on premiums when the plan is set up correctly.

 

Dallas Market Comparison: Level-Funded vs. Fully-Insured

 

Feature			Level-Funded                                                          Fully-Insured
Monthly Cost			Usually lower; potential for refund		Fixed and often higher
Risk to Employer			Limited (stop-loss protection)		None – carrier assumes all risk
Plan Flexibility			High – customizable designs		Lower – limited carrier options
Transparency			Full claims reporting		Minimal claims visibility
Renewal Impact			Based on your actual group’s performance		Based on the carrier’s pooled risk
Best For			Healthy, stable employee populations		Groups with high claims risk or volatile turnover

 

Real Dallas Examples

• Tech Startups in Plano often opt for level-funded plans to keep premiums low while offering competitive benefits to attract talent.
• Professional Services Firms in Richardson: Appreciate claims transparency and the potential refund.
• Hospitality Businesses in Dallas: Sometimes stick with fully-insured due to seasonal staff turnover and higher claims volatility.

Cost Impact in DFW

 

While every group is different, here’s what we’ve seen:

• A Dallas business with 20 employees on a fully-insured plan might pay $12,000–$15,000/month.
• The same group on a level-funded plan could see rates closer to $8,000–$10,500/month.
• That’s annual savings of $36,000–$72,000 —without cutting coverage.

Pros & Cons for Dallas Employers

 

Level-Funded Pros

• Lower potential cost
• Possible refund if claims are low
• Detailed claims data
• Flexible plan design

Level-Funded Cons

• Requires some risk tolerance
• Not ideal for groups with high ongoing claims

Fully-Insured Pros

• Zero claims risk to the employer
• Simple, predictable billing
• No need to manage claims

Fully-Insured Cons

• No refunds if claims are low
• Limited plan flexibility
• Annual rate hikes are common

Compliance & Reporting in Texas

• Level-Funded Plans: May require Form 5500 filings if ERISA applies.
• Fully-Insured Plans: Simpler compliance but still must meet ACA, COBRA, and Texas-specific benefit mandates.
• Dallas-based employers should also ensure that any plan integrates smoothly with payroll and HR systems for ACA reporting.

FAQ for Dallas Employers

 

Q: Is a level-funded plan right for my small business?
A: If your workforce is generally healthy and stable, level-funded often delivers the best value in Dallas.

Q: Can I switch from fully-insured to level-funded mid-year?
A: Most employers wait until renewal, but special circumstances (M&A, big workforce changes) can allow earlier switches.

Q: What if claims are higher than expected?
A: Your stop-loss coverage absorbs large claims, protecting your business from financial surprises.

 

Final Word for Dallas Businesses

 

The choice between level-funded and fully-insured comes down to cost control, risk tolerance, and plan flexibility. In the Dallas/Richardson/Plano area, we’ve seen a clear trend toward level-funded models—especially for small businesses that want competitive benefits without breaking the bank.

At Bear Benefits, we’ve been guiding Dallas businesses through these choices for more than 30 years. We know the local market, the carriers, and the cost structures—and we love helping small businesses make benefits work for their bottom line.

 

Ready to Explore Your Options?

 

Contact Bear Benefits today for a no-obligation Dallas benefits review. Let’s compare your current plan against both fully-insured and level-funded options—you might be surprised at the savings.

 

Book your meeting here.