Rethinking health plan funding: Does your current approach still fit?

Fully funded or self-funded. For a long time, that was how most employers approached health plan funding. A simple decision between predictability and control. 

Fast forward to today, funding is less about picking a category and more about deciding how much control you want over your plan. You are likely taking a closer look at not just what you spend, but how that spend is structured, how much visibility you have into it and how much influence you have over it.

In fact, about one third of employers that have traditionally been fully insured are now exploring alternative funding approaches to better manage rising costs.¹

The shift is not just about new options entering the market. It reflects a different mindset. One where you are asking more pointed questions about tradeoffs, flexibility and taking ownership of plan risks. So, the question is no longer “which funding model is best?” But whether your current approach aligns with what your organization needs today.

How do you know what health plan funding fits? 

Different organizations prioritize different outcomes. The right answer often comes down to a few core questions: How predictable do your costs need to be? How much visibility do you want into what’s driving costs? And how actively do you want to manage your plan over time?

Your priority is budget predictability and simplicity:

Fully funded plans are a natural fit when stability and consistently manageable costs are most important.

Fully funded plans offer: 

• Fixed premium for consistent, predictable costs
• Streamlined administration 
• Stability and ease of management

Your priority is greater insight into costs without giving up predictability or support:

Level-funding is a strong next step if you are looking for more visibility into your spending but are not ready to take on a significant financial variability.

Level-funded approaches can provide: 

• A practical entry point into self-funding
• Predictability with some opportunity for savings
• Structure to balance insight with guided support

Your priority is increased flexibility and control:

Self-funding may be the right path if you want control over how your plan performs and is managed.

Self-funded models can offer:

• Increased insight into healthcare spend
• Greater flexibility in plan design
• The ability to align strategy with workforce needs

Your priority is maximum flexibility in plan design and customization:

A TPA model may be worth exploring if you are looking for even more control across vendor partners, services and strategy. 

TPA models can provide:

• The ability to select and manage vendor partners 
• Flexibility to design the plan around workforce needs
• Control over how the program is structured and evolves

There is no one right way to fund your health plan. What matters is choosing an approach that aligns with your priorities, your tolerance for risk and the level of involvement you want in managing your plan.

Taking the time to evaluate your approach now can help ensure your strategy is built for what comes next.

Learn how Priority Health supports employers with a range of funding options. 

1 Mercer Survey on Health and Benefit Strategies for 2025.