When a fully insured plan may make sense
Designed for predictability, a fully insured plan may be the best route for some employers.
Even with health care premiums rising, many employers opt for fully insured plans because they provide consistent and predictable monthly costs. In 2025, the average annual family premium for employer-sponsored coverage reached $26,993 — up 6% from the year before — according to the KFF 2025 Employer Health Benefits Survey.1 Yet fully insured plans remain a steady choice for employers who value budget certainty and simplified administration.
While self-funded and level funded plans continue to grow in popularity, fully insured plans still cover a significant share of workers. In 2025, 33% of covered workers were enrolled in fully insured plans, including 73% of covered workers at small firms (10 to 199 employees).2
However, it’s important to note the fully insured market is facing notable cost pressures. For 2026, the median proposed premium increase among 318 small group insurers across all 50 states and the District of Columbia was 11%, according to the Peterson-KFF Health System Tracker.3 Increasing health care costs, higher prescription drug costs and utilization, rising labor expenses and overall economic inflation are among the primary drivers.3
Here's a closer look at when a fully insured plan may make sense — and what employers should consider before deciding.
Why employers choose fully insured plans
1. Predictable monthly costs
With a fully insured plan, the employer and carrier typically agree on a fixed monthly premium at the start of the plan year, based on the employer's workforce and the insurer's fees. This premium remains the same throughout the year, allowing employers to budget with certainty.
That predictability matters. If a workforce includes employees with cancer diagnoses or pregnancies — which may increase health care claims — a fully insured plan with a fixed monthly premium may provide a sense of financial security that self-funding may not match.
For employers who are risk-averse, especially smaller ones, a fully insured plan is often the preferred choice. Larger employers, with a broader workforce, can spread the risk of high claims more easily. But smaller employers benefit from the predictability and stability of fixed costs — and even when premiums are rising, there are still options fully insured employers can consider to help mitigate those costs.
2. Less administrative burden
Fully insured plans also appeal to employers who lack the staff, resources or expertise to manage health care benefits independently. With a fully insured plan, employers can typically choose from a variety of off-the-shelf benefits packages, offer them to employees and hand off the administrative burden, compliance requirements and claims payments to the carrier.
This "set-it-and-forget-it" quality may give HR teams more time to focus on other priorities. The carrier handles enrollment, ID cards, explanations of benefits (EOBs) and member services, reducing the day-to-day workload for employers.
3. Carrier-managed compliance
With a fully insured plan, employers may outsource much of the responsibility for meeting federal and state legal requirements to the insurance carrier. The carrier handles many regulatory requirements, which may help employers avoid the burden of ensuring compliance with various laws and regulations on their own.
Fully insured plans in the small group market automatically meet Affordable Care Act (ACA) essential health benefit and actuarial value requirements, and the insurer serves as the HIPAA covered entity for protected health information, limiting the employer's exposure to employee health data. In contrast, self-funded plans carry additional compliance obligations under Employee Retirement Income Security Act (ERISA), HIPAA, the ACA and federal transparency rules — responsibilities that employers or their third-party administrators (TPAs) must manage directly.
When a fully insured plan may not be the best fit
Fully insured plans trade control and flexibility for predictability and simplicity. Employers who are willing to take on more risk for greater control over their benefit strategies — and the potential for cost savings — may find that self-funded or level funded plans are more appropriate options.
One brokerage estimates that the cost savings for switching from fully insured to self-funded may be 3–5% as employers bypass insurance premiums, taxes and other carrier costs.4 However, that potential comes with greater financial responsibility, the need for stop loss coverage and additional compliance obligations.
The market is continuing to see an accelerated shift from fully insured to self-funded plans, with estimates projecting fully insured enrollment to drop from 53M in 2023 to 49M in 2028, while self-funded enrollment is projected to climb from 110M to 114M during the same period.5 Explore the trade-offs of different funding options.
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