Level Funded vs Fully Insured Health Plans in Washington (2027)

By Brandon Hoobler | 07/17/2026

Last reviewed: October 16, 2026. Written by Brandon Hoobler, licensed Washington insurance broker.

A fully insured plan fits Washington employers who want a set price, no year-end settling up, and no claims risk of their own. That includes groups with someone facing ongoing medical care. A level-funded plan fits groups of mostly healthy employees who can pass underwriting and want a chance at money back after a good year.

This guide is about choosing between the two for 2027. If you want the basics first, read our guide to how level-funded health plans work, then come back here.

Key takeaways

Fully insured: you pay a set premium and the carrier carries the claims risk. For groups of 1 to 50, your group’s health history does not set the price.
Level-funded: you also pay a set monthly amount, but part of it funds your own claims. A good year can bring a refund. A bad year is covered by stop-loss, then shows up at renewal.
Washington stop-loss law (RCW 48.21.015) requires an aggregate attachment point of at least 120% of expected claims. Any individual attachment point must be at least 5% of expected claims or $100,000, whichever is less.
State oversight is different. The Washington Office of the Insurance Commissioner (OIC) does not regulate self-funded plans, and level-funded plans are a form of self-funding. State benefit mandates generally do not apply by law.
Options are thinner under 51 employees. Of the carriers we verified, only UnitedHealthcare publishes level-funded availability in Washington for groups that small.
Leaving takes planning. Run-out claims, surplus timing and terminal liability terms all matter when you end a level-funded plan.
Quote both. Getting a level-funded quote does not commit you to anything, and our help costs you nothing extra.

Level-funded vs fully insured at a glance

Level funding is no longer a niche product. In the KFF 2025 Employer Health Benefits Survey, 37% of covered workers at firms with 10 to 199 workers were in a level-funded plan. Here is how the two compare on the factors that drive the decision.

Factor	Fully insured	Level-funded
How the price is set	For groups of 1 to 50, from the carrier’s small group rates filed with the OIC. Washington allows only four factors: geographic area, family size, age, and wellness activities. Health history is not one of them.	Underwritten for your group. One monthly payment covers a claims fund, stop-loss premium and administration.
Who carries claims risk	The carrier.	You, up to the stop-loss attachment points. The stop-loss carrier pays above them.
Surplus refund	None. The carrier keeps any difference.	Possible. Part of an unused claims fund may come back as a refund or credit. The share varies by carrier.
Underwriting	Not based on health for small groups (1 to 50).	Census, and often health questionnaires or claims reports. A group can be declined or quoted high.
Washington benefit mandates	Apply. The OIC regulates the plan.	Generally do not apply by law. Federal law governs, and the plan document sets the benefits.
Plan design flexibility	Choose from the carrier’s filed plan menu.	Choose from the carrier’s level-funded portfolio. Some carriers describe more flexibility than their insured plans.
Renewal volatility	For groups of 1 to 50, driven by the carrier’s filed rates and your employees’ ages, not your claims.	Driven by your own claims. A bad year can mean a sharp increase or a “laser” on one person.
Administration and reporting	The carrier handles claims. Your plan duties are lighter.	The carrier or a third-party administrator handles claims. You are the plan sponsor with ERISA fiduciary duties. You may get more detailed claims data.
Complaints go to	The Washington OIC.	The U.S. Department of Labor.
Termination and run-out	Claims incurred while covered stay with the carrier.	Claims that arrive after you leave need a plan. Check run-out, terminal liability and surplus rules before you sign.

What Washington law says

Washington’s stop-loss rules

Every level-funded plan relies on stop-loss insurance. In Washington, group stop-loss is governed by RCW 48.21.015. It sets four main rules:

The policy insures the employer, the plan sponsor, or the plan itself. It does not insure employees.
The stop-loss carrier pays the employer or the plan. It does not pay employees or doctors directly.
Every policy must have an aggregate attachment point of at least 120% of expected claims.
If there is an individual (specific) attachment point, it can’t be lower than 5% of expected claims or $100,000, whichever is less.

The law does not set different minimums by employer size. We found no separate small-employer stop-loss rule in the RCW or on the OIC site. The NAIC’s Spring 2025 chart of state stop-loss laws lists only these rules for Washington, plus separate rules for multiple employer arrangements.

In plain terms, aggregate stop-loss steps in only after your group’s total claims run at least 20% above expected. For small groups, the individual floor is low. A group expecting $150,000 in claims could have an individual attachment point as low as $7,500 (5% of $150,000).

Stop-loss carriers must also file their rates with the OIC before using them, according to the OIC’s stop-loss filing guidance.

State mandates and who regulates the plan

The OIC regulates fully insured group plans. A level-funded plan is a form of self-funding. Kaiser Permanente’s level-funded site, for example, calls its program “a self-funded plan.” The OIC says plainly, “We don’t regulate self-funded plans.” Those plans follow federal law, including ERISA, and complaints go to the U.S. Department of Labor.

In January 2025, the Health Care Authority, the OIC and the Health Benefit Exchange briefed the state Senate on coverage. Their presentation said federal law preempts the state and the OIC from regulating self-funded plans on central matters of plan administration. It counted about 2.3 million Washingtonians in self-funded plans in 2023, compared with about 1.2 million in fully insured plans.

The practical result: Washington’s mandated benefits generally do not apply to a level-funded plan as a matter of law. Level-funded plans are generally treated as self-funded for this purpose, so state mandates and state filing do not apply. The OIC’s list for insured plans includes mammograms, diabetes supplies and education, mental health parity, and neurodevelopmental therapies for group enrollees age six or younger. A level-funded plan may still cover these. The plan document decides, so compare it to your current plan line by line.

Some protections apply either way. The federal No Surprises Act protects people in self-funded plans from surprise bills. Washington also lets a self-funded plan opt in to the state Balance Billing Protection Act by notifying the OIC at least 15 days ahead. Federal COBRA applies to employers with 20 or more employees no matter how the plan is funded. See our COBRA administration page for how we help.

As the sponsor of a self-funded plan, you also take on more ERISA fiduciary duty. The Department of Labor notes that most employers sponsoring fully or partially self-funded plans exercise some discretion over the plan. That generally makes them fiduciaries. Employee payroll contributions count as plan assets with their own handling rules. Please confirm how this applies to your business with your CPA or attorney.

Carriers that publish level-funded plans in Washington

We list only carriers whose own websites say they offer level-funded plans to Washington employers. Availability changes, so treat this as a starting point.

UnitedHealthcare. Its 2025 Level Funded portfolio notice lists Washington in an expansion to groups of 2 to 4 employees. That change took effect October 1, 2024. UHC notes surplus refunds are available only where allowed by law.
Kaiser Permanente. Its level-funded site lists a plan for businesses with 51 to 100 eligible employees in Oregon and southwest Washington counties. Its 5 to 100 program lists other states, not Washington.
Regence. Regence announced its level-funded LevelBlue offering in June 2020 for employers with 51+ employees in Idaho, Oregon, Utah and Washington. Regence serves select Washington counties, so confirm current availability where you are.

Premera Blue Cross does not use the term level-funded. Its OptiFlex option is similar: Premera describes a fixed rate with more flexibility than fully insured funding for groups of 51+. An earlier Premera notice also describes surplus sharing in low-claim years.

Minimum group sizes

The OIC says any Washington business with 1 to 50 employees can buy coverage in the small employer market. Published level-funded minimums are higher for most carriers:

UnitedHealthcare: groups as small as 2 in Washington (per its 2024 notice).
Kaiser Permanente: 51 to 100 eligible employees, southwest Washington counties.
Regence LevelBlue: 51+ employees (2020 announcement).
Premera OptiFlex (a similar arrangement): 51+ enrolled employees.

As of October 16, 2026, we could not find 2027 level-funded group-size rules on every carrier’s site. Kaiser Permanente’s page, for example, still shows its 2026 portfolio. We confirm current group-size and county rules when we quote.

Underwriting: who qualifies and what can disqualify a group

A fully insured small group plan is priced from the carrier’s filed rates. Washington law lets small group carriers vary price only by geographic area, family size, age, and wellness activities, and federal rules cap age pricing at a 3 to 1 range. Your group’s health history is not on the list.

Level funding works differently. The carrier underwrites your group before it quotes. Depending on the carrier and your size, that can mean an employee census, individual health questionnaires, prior claims reports, or all three.

Factors that tend to raise a level-funded quote or lead to a decline:

An employee or dependent with an ongoing high-cost condition, such as active cancer treatment or dialysis.
A recent large claim that is likely to continue into the plan year.
Low enrollment, or employees who don’t complete the health questionnaires.
A very small group, where one claim can swing the whole result.

Stop-loss can also come with a “laser.” That is a higher individual deductible for one person expected to have large claims. As an illustration, a $50,000 individual deductible might be raised to $200,000 for one person. Fully insured plans don’t use lasers.

Getting underwritten doesn’t commit you to anything. If the level-funded quote isn’t better than your fully insured renewal, you can keep the insured plan.

How surplus refunds and run-out work

Your monthly level-funded payment has three parts: a claims fund, the stop-loss premium, and administration. Only the claims fund can produce a refund.

Claims don’t all arrive by the last day of the plan year. Some care received in December is billed and paid after the year ends. So carriers allow a run-out period for late claims, then compare claims paid against the claims fund. Ask each carrier how long its run-out period is.

If the fund came in under, part of the surplus may come back to you. The share varies. Cigna’s national funding page, for example, lists a 50% surplus share, or 67% if you renew. UnitedHealthcare says its refund may be applied to the following year’s plan.

If claims ran over the fund, aggregate stop-loss pays the difference. Your payments for that year do not change.

Illustration: one good year and one bad year

This is an illustration with round numbers, not a quote. Real results depend on the carrier, the plan design and your group.

Picture a 20-employee Washington group. The carrier expects $150,000 in claims for the year. The claims fund is $180,000, which is 120% of expected claims and also the aggregate attachment point in this example. Stop-loss premium and administration add $60,000. The total is $240,000, or $20,000 a month.

Good year: claims paid through the run-out period total $140,000. That leaves $40,000 in the fund. At a 50% surplus share, you would get $20,000 back as a refund or credit.
Bad year: claims total $230,000. The fund covers $180,000 and aggregate stop-loss pays the other $50,000. You still paid $240,000 for the year, and no more. The cost shows up at renewal.

A fully insured plan for the same group would also have a set premium. You would get nothing back in the good year. In the bad year, your own claims would not directly drive your next small group renewal.

Leaving a level-funded plan

Ending a level-funded plan takes more planning than ending an insured one. Claims incurred before your last day can still arrive afterward. Ask these questions before you sign:

How long is the run-out period, and who pays claims that arrive after it ends?
Is there a terminal liability option? Some terminal liability terms can limit a later move to another self-funded or level-funded plan.
What happens to the surplus if you don’t renew? Some carriers pay a smaller share, as Cigna’s renewal-based share shows.
How much notice does the carrier require to end the plan?

Renewals and what happens after a bad claims year

A fully insured small group renewal in Washington is driven by the carrier’s filed rates and your employees’ ages. One expensive claim in your group does not set your renewal.

A level-funded renewal is driven by your own claims. A good year can mean a flat or modest renewal. A bad year can bring a sharp increase or a laser on one person.

Good years do happen. We have moved several McDonald’s franchise owners from corporate-arranged plans to level-funded packages. They saw lower costs up front, steady rates through the year, and claims refund checks at year end. Not every group will see that outcome.

Going back is possible. Any Washington business with 1 to 50 employees can buy in the small employer market. So a small group with a bad level-funded renewal can compare it to a fully insured plan. Just plan the timing around run-out and your surplus. Our guide to a big renewal increase covers the next steps.

For groups of 51 or more, options after a bad year depend on the carrier. Ask for the renewal as early as the carrier will release it. These questions to ask before renewal help either way.

What employees notice

Usually not much. With a carrier-packaged level-funded plan, employees still get an ID card, use a network and receive an explanation of benefits. Most never know how the plan is funded.

Where they can notice a difference:

Network. The level-funded plan may use a different network from the one they have now. Check key doctors, clinics and hospitals. Here is why in-network vs out-of-network matters.
Covered services. Since state mandates don’t automatically apply, a service covered today could be covered differently. Compare the plan documents.
Complaints. A complaint about a self-funded plan goes to the U.S. Department of Labor, not the OIC.
Health questionnaires. If the carrier asks employees to complete them, explain why before you hand them out.

We help with that conversation through employee meetings and enrollment on Employee Navigator at no added cost.

When to stay fully insured

Level funding is worth a look for many groups. It is not right for every group. Staying fully insured usually makes more sense when:

Someone on the plan has a known high-cost condition that will continue into 2027.
Your budget could not absorb a sharp renewal increase after a bad year.
Your group is very small and one claim would swing the results.
You want Washington’s mandated benefits built in and OIC oversight.
You don’t want ERISA plan-sponsor duties or year-end settling up.
Your employees rely on a network only available on your current insured plan.
You expect to change carriers or funding again soon, and run-out would complicate it.

If cost is the main worry, our guide to group health insurance costs in Washington covers other ways to manage it. So does can a small business afford employee benefits.

Decision checklist

Get your 2027 fully insured renewal and alternative group health options.
Pull an up-to-date employee census, and decide whether you are comfortable asking employees to complete health questionnaires.
Request level-funded quotes from carriers that serve your group size and county.
Compare your maximum annual level-funded cost (12 monthly payments) with the fully insured premium.
Read the stop-loss terms: aggregate and individual attachment points, and any lasers.
Ask about surplus share, when it is paid, and whether it depends on renewing.
Ask about run-out, terminal liability and termination notice.
Compare networks and plan documents with your current plan, including any Washington mandated benefits your employees use.
Confirm your ERISA paperwork and fiduciary duties with your CPA or attorney.
Plan how you will explain the change to employees.

Get both quotes side by side

We quote Washington carriers, including Premera, Regence and Kaiser Permanente. We compare fully insured and level-funded options side by side for employers with 5 to 500 employees. Brokers are paid by the insurance carrier, so you pay nothing extra for our help.

Call (206) 653-9636 or request a quote. You can also read more about Brandon Hoobler.

Frequently asked questions

Is a level-funded plan cheaper than fully insured in Washington?

Sometimes, for groups that underwrite well. It is not guaranteed. Compare the 12 monthly level-funded payments, which are your maximum cost for the year, with the fully insured premium. Then weigh the chance of a refund against the risk of a higher renewal.

Do Washington benefit mandates apply to level-funded plans?

Generally not as a matter of law. Level-funded plans are a form of self-funding, and the OIC says it does not regulate self-funded plans. Federal law applies instead. The plan document sets the benefits, so compare it with your current plan.

What are Washington’s minimum stop-loss attachment points?

Under RCW 48.21.015, the aggregate attachment point must be at least 120% of expected claims. Any individual attachment point must be at least 5% of expected claims or $100,000, whichever is less. The law does not set different minimums for small employers.

Can we go back to fully insured after a level-funded year?

Yes. The OIC says any Washington business with 1 to 50 employees can buy coverage in the small employer market. Plan the timing around run-out claims and any surplus you are waiting on. Larger groups should ask their broker about options early.

What is the smallest group that can get a level-funded plan in Washington?

UnitedHealthcare published Washington availability for groups of 2 to 4 effective October 1, 2024. Kaiser Permanente lists 51 to 100 eligible employees in southwest Washington counties. Regence announced LevelBlue for employers with 51+ employees. Rules change, so confirm current availability when you quote.

Will my employees notice the switch?

Usually not much. They still get an ID card, a network and explanations of benefits. The biggest things to check are whether their doctors are in the new network and whether any service they use is covered differently.

About the author

Written by Brandon Hoobler, founder of Washington Insurance Brokers and a licensed Washington insurance broker (WA OIC #824207, verify a license). He has worked in insurance since 2009 and helps Washington employers with 5 to 500 employees compare group benefits. Questions about your plan? Call (206) 653-9636.

Sources

Posted in Employee Benefits