If you read our article on why premiums keep climbing, you already know the core issue: in a fully funded plan, you pay a fixed premium, the carrier keeps any surplus, and you have very little visibility into what’s actually happening with your money.

The natural question is: what else is out there?

The answer is more encouraging than most business leaders expect. There are several alternative plan structures, each designed to give you more control, more transparency, or both. None of them are exotic or experimental. They’ve been around for years. The reason you may not have heard of them is that your broker may not have had a reason to bring them up.

Let’s walk through the main alternatives.

Level-funded plans

A level-funded plan is probably the closest relative to a fully funded plan, and it’s often the most natural first step for businesses exploring their options.

Key term — Level-funded plan: A health insurance arrangement where you pay a fixed monthly amount (like a fully funded plan), but that payment is divided into three buckets: expected claims costs, administrative fees, and stop-loss insurance. If actual claims come in below the expected amount, you may receive a refund of the surplus.

Here’s what makes this different from fully funded: you’re still paying a predictable monthly amount, but the structure is transparent. You can see where your dollars are going. And if your team is healthy and claims are low, you don’t just subsidize someone else’s risk pool — you get money back.

Stop-loss insurance protects you from catastrophic claims, so your downside risk is capped. You’re not gambling on your employees’ health. You’re simply participating in the upside when things go well.

Best for: Businesses with 10 to 200 employees that want predictable costs but also want the chance to benefit from good claims performance. This is a strong fit if your workforce is generally healthy and you want transparency without complexity.

Partially self-funded plans

Partial self-funding takes the concept a step further. Instead of paying a carrier to handle everything, you fund claims directly, up to a certain threshold. Beyond that threshold, stop-loss insurance kicks in to cover large or unexpected claims.

Key term — Partially self-funded plan: A plan where the employer pays claims out of a dedicated fund up to a set limit, with stop-loss coverage protecting against unusually high claims. The employer retains full visibility into claims data and keeps any surplus.

This gives you even more control. You see exactly what’s being spent, on what, and where the cost drivers are. You can use that data to design wellness programs, negotiate with providers, or adjust plan design in ways that actually move the needle.

The tradeoff is that it takes more involvement. You’ll need a third-party administrator (TPA) to process claims, and you’ll want a benefits advisor who understands how to manage a self-funded plan effectively.

Best for: Businesses with 50 or more employees that have the appetite for more hands-on management of their benefits strategy. Particularly strong for organizations that want to use data to actively manage healthcare costs over time.

PEO partnerships

A Professional Employer Organization (PEO) takes a very different approach. Instead of restructuring how your plan is funded, a PEO pools your employees with employees from many other small businesses. That larger pool gives you access to benefits that would normally be available only to much bigger companies.

Key term — PEO (Professional Employer Organization): A company that provides HR, payroll, and benefits services by pooling employees from multiple small businesses into a single large group. This gives small employers access to better rates and richer benefits packages.

Through a PEO, you might be able to offer your team a benefits package that looks like what a Fortune 500 company provides. The PEO handles administration, compliance, and renewals. You focus on running your business.

The limitation is that you give up some control. The PEO selects the carriers and plan designs. You’re choosing from their menu, not building your own. And because you’re part of a shared pool, you won’t typically have access to your own claims data or the ability to recover surplus premiums.

Best for: Very small businesses (under 25 employees) that want to offer competitive benefits without building an in-house HR function. Also a good fit if your priority is simplicity and access to richer plan options rather than cost transparency.

ICHRA (Individual Coverage Health Reimbursement Arrangement)

ICHRA is the newest model on this list, and it represents a fundamentally different philosophy. Instead of choosing a group plan for everyone, you give each employee a fixed monthly allowance to purchase their own individual health insurance on the open market.

Key term — ICHRA: An IRS-approved arrangement where the employer provides a tax-free allowance for employees to buy their own individual health insurance. Each employee picks the plan that works best for them, and the employer’s cost is fixed and predictable.

This flips the traditional model. Employees get choice. They can pick the plan that fits their family, their doctors, and their budget. You, the employer, set a monthly contribution amount and let them shop. The money you provide is tax-free to the employee and tax-deductible for the business.

There’s no claims risk for you at all. Your cost is simply the total of the allowances you set. There’s no renewal surprise, no risk pool averaging, and no surplus to worry about — because you’re not funding claims. You’re funding choice.

The challenge is that it shifts more decision-making to employees. Some people find shopping for insurance empowering. Others find it overwhelming. The success of an ICHRA depends heavily on how well it’s communicated and supported.

Best for: Businesses of any size that want completely predictable costs and want to give employees the freedom to choose their own coverage. Particularly strong for companies with a geographically dispersed workforce where a single group plan doesn’t make sense.

How these options compare

No single alternative is the right answer for every business. Here’s a simple way to think about the tradeoffs:

  • Level-funded: Predictable costs, moderate transparency, potential for surplus refund. Low complexity.
  • Partially self-funded: High transparency, strong cost control, potential for significant savings. Moderate complexity.
  • PEO: Access to richer benefits, minimal administrative burden. Low transparency, limited control.
  • ICHRA: Completely predictable employer costs, maximum employee choice. No claims risk, but requires employee education.

Each of these models solves a different problem. Level-funded plans are about getting a fairer deal with minimal disruption. Partial self-funding is about taking the wheel and driving costs down with data. PEOs are about punching above your weight class. ICHRA is about getting out of the group plan business entirely.

Understanding your options is step one

Knowing what’s available is important. But knowing which option fits your specific business, your team, your budget, and your risk tolerance is what actually matters.

That’s where evaluation comes in. The right plan structure depends on your claims history, your employee demographics, your growth trajectory, and your appetite for involvement. It’s not a decision you should make from a blog article alone, but it is a decision you should make with your eyes open.

The next step is understanding how money actually flows through these different structures, and what happens to the premiums you pay when your team stays healthy. That’s what we cover next.