The typical mid-market employer reviews its health benefits once a year. The renewal lands, the rate increase gets debated, costs get shifted or absorbed, and the plan stays as it is. What rarely happens is a conversation about whether the funding structure itself still makes sense, and that gap is a genuine opening for the benefits broker who raises it first.
That gap is measurable, and it is drawing attention. Jennifer Schaefer, founder and CEO of JS Benefits Group, made that argument in a Forbes Business Council post. She wrote that most mid-market employers have never formally evaluated whether their health plan funding structure still makes sense.
The data supports that observation. The Kaiser Family Foundation's (KFF) 2025 Employer Health Benefits Survey found that 80% of covered workers at large companies are enrolled in self-funded health plans. At firms with 10 to 199 employees, that figure is 27%.
The difference is not explained by plan complexity alone. In most cases, large employers evaluated their options, often with a broker or consultant driving that analysis. Many mid-market employers never have, largely because no one has walked them through it.
A fully insured plan provides cost certainty. Employers pay a fixed premium, the carrier assumes the risk, and budgeting is straightforward. That simplicity is exactly why the funding question rarely comes up on a client's own initiative: nothing about a fully insured renewal prompts the client to ask whether a different structure would serve them better.
The challenge is that most employers under fully insured arrangements have limited access to their own claims data. They see the renewal number but not the underlying drivers. A broker who requests and reviews that claims data before renewal, rather than waiting for the client to ask, is the only person in the relationship positioned to notice a genuine funding mismatch before it shows up as an unexplained rate increase.
Level-funded plans sit between fully insured and traditional self-funded arrangements. Employers pay fixed monthly amounts and purchase stop-loss insurance to cap exposure on high-cost claims. If the plan performs well, unused funds can be returned at year end.
KFF's 2025 survey found that 37% of covered workers at firms with 10 to 199 employees are now in level-funded plans. Insurers filing 2027 rate increases point to continued growth in level-funded arrangements as a factor actively reshaping the small group risk pool, which matters even for a broker's clients who stay fully insured: as healthier groups exit into level-funded structures, the fully insured pool left behind skews sicker and costlier, meaning a client who does nothing is not standing still, they're absorbing a worsening risk pool by default.
Group captive arrangements are also drawing wider interest among mid-sized employers. Employers pool together in a shared risk structure, retain responsibility for routine claims, and access stop-loss reinsurance as a group for catastrophic costs.
Programs now accept employer groups with as few as 50 to 150 employees, but headcount is not the threshold that actually matters. Captive managers are underwriting on claims credibility, not size: they generally want to see three to five years of stable, reliable loss data before considering an employer a good fit, since that history is what lets them distinguish a client's genuine risk profile from statistical noise. Captives also expect real commitment from company leadership, particularly the CFO, to actively managing healthcare costs and employee health outcomes going forward, since all participating employers draw from the same shared claims pool. A client with volatile, thin, or poorly documented claims history, or leadership uninterested in ongoing cost management, is not yet a captive candidate regardless of headcount, and a broker should screen for that before raising the idea.
The case for evaluating alternatives is not that every employer should move away from fully insured coverage. It is that the decision should be made intentionally, with the broker driving the analysis, rather than by default because no one raised the question.
The cost environment makes the funding conversation harder to defer. Insurers are requesting a median 14% premium increase for the small group market in 2027. That figure comes from KFF analysis of rate filings from nearly 300 insurers across all 50 states and is above the 11% increase requested entering 2026.
KFF research points to a compounding problem. Fully insured small group enrollment fell 41% between 2013 and 2024, from 17 million to 10 million covered workers. Healthier groups exit for level-funded arrangements, which leaves a sicker and more costly population in the fully insured pool.
KFF researchers warned that continued level-funded growth "has the potential to further erode the fully-insured small group risk pool and could contribute to future premium increases for small businesses, particularly those with sicker employees."
The funding question focuses on timing for benefits brokers. A mid-market client that has never reviewed its funding structure is a client that has never fully understood what drives its health plan costs, and analysis that begins six to nine months before renewal allows time to review claims data, compare models, and arrive at an informed recommendation, rather than scrambling to react to a 14%-range increase 60 days out.
In practice, that means three concrete steps worth building into every mid-market client relationship now: request claims data access at the next renewal discussion, even for fully insured clients, since carriers will often provide aggregate claims summaries on request; screen each client against the three-to-five-year stable-claims-history benchmark before proposing a captive or level-funded structure, so the conversation starts with a realistic option rather than a mismatch; and flag explicitly to clients staying fully insured that the pool they're in is shrinking and skewing sicker, so a flat or declining headcount doesn't get mistaken for a stable risk profile.
Level-funded and self-funded plans carry tradeoffs that fully insured plans do not: no guaranteed renewal, reduced ACA consumer protections, and direct financial exposure in high-claims years. A funding model matched to a client's workforce demographics, claims history, cash flow, and risk tolerance requires analytical work that the client is not going to initiate on their own. Brokers who start it early, and who lead with the client's own claims data rather than a generic pitch for an alternative structure, are the ones who will be trusted with that recommendation when the renewal numbers force the conversation regardless.
