Should I offer fully-insured or self-funded health insurance?

Three structures, increasing in employer risk and reward:

• Fully-insured: the carrier takes the claims risk in exchange for a fixed monthly premium. Predictable cash flow; the carrier eats catastrophic claim years. NY's small-group market (1–100 employees) is dominantly fully-insured because community rating compresses the pricing edge. Standard for most healthcare practices and small employers.
• Self-funded (also called self-insured): the employer takes the claims risk directly, paying actual claims as they're incurred plus an administrative fee to a third-party administrator (TPA). Lower fixed cost than fully-insured, but volatile — a few large claims can blow the budget. Stop-loss insurance caps the catastrophic exposure. Generally only viable at 50+ employees with stable cash flow, and historically more common in the large-group market. Self-funded plans are ERISA plans regulated federally, which exempts them from most state mandates including NY's mandated benefits and community rating — a meaningful structural advantage for some employers but a compliance burden in others.
• Level-funded: a hybrid product, increasingly popular in the 25–100 employee range. Looks and feels like fully-insured (predictable monthly payment), but is technically self-funded with a tight stop-loss. The carrier returns a portion of the premium back to the employer if claims come in below expected — capturing some of self-funded's upside without full claims-volatility risk. Often the right starting point for healthier mid-sized employers wanting to test self-funding without full exposure.

The right structure is driven by claims experience, cash-flow stability, NY-specific mandate considerations, and risk tolerance. We model fully-insured vs. level-funded vs. self-funded at quote time when employee count and demographics make the comparison meaningful.