Fully Insured, Self-Funded, and Level-Funded Plans: What’s the Difference and Why Part D Determinations Matter
When it comes to employer-sponsored health coverage, not all plans are created equal. The way a plan is structured, whether fully insured, self-funded, or level-funded, shapes everything from cost and flexibility to compliance requirements. And for employers offering prescription drug benefits, it also determines how you handle Medicare Part D Creditable Coverage Determinations.
Let’s break down what each plan type really means, what kind of employer it tends to fit best, and how it ties into your Part D compliance strategy.
Fully Insured Plans
What It Is
A fully insured plan is the most traditional setup. The employer purchases a health insurance policy from a carrier like Blue Cross, Aetna, or UnitedHealthcare. The carrier assumes all financial risk for claims and handles administration, plan design, and compliance testing.
Best For
Small to mid-sized employers that want predictability and simplicity
Organizations without in-house benefits or compliance expertise
Groups that value convenience over customization
Part D Determination Impact
Carriers typically provide a creditable coverage status for these plans, so the employer often assumes the job is done. However, it’s important to confirm the determination is accurate and timely, as carriers may delay or provide only partial information. Employers remain responsible for ensuring notices go out correctly each year.
Self-Funded (Self-Insured) Plans
What It Is
A self-funded plan flips the model: the employer pays employees’ medical and prescription claims directly. A TPA (Third Party Administrator) or PBM manages the claims and network, but the employer carries the financial risk.
Best For
Larger employers with stable cash flow and 200+ employees
Companies looking for maximum flexibility and data transparency
Employers who want to customize benefits and control costs long-term
Part D Determination Impact
Unlike fully insured plans, self-funded plans are responsible for their own Part D Creditable Coverage Determinations. This usually requires actuarial testing to ensure the prescription drug plan is at least as good as Medicare’s standard coverage.
Historically, this has been a slow, manual, and expensive process, but automation platforms like Creditable now allow employers and TPAs to handle it accurately in minutes.
Level-Funded Plans
What It Is
A level-funded plan is the hybrid model. Employers pay a set monthly amount (the “level”) that includes estimated claims, stop-loss insurance, and administrative costs. If claims are lower than expected, they may receive a refund; if higher, stop-loss coverage kicks in.
Best For
Mid-sized employers (typically 25–200 employees)
Companies that want some cost predictability but more flexibility than a fully insured plan
Employers exploring the transition toward self-funding
Part D Determination Impact
Many assume level-funded plans are “fully insured,” but they’re technically self-funded which means the employer (or their broker/TPA) is still responsible for obtaining a creditable coverage determination. This is one of the most common compliance blind spots we see.
Without proper testing, these plans can easily fail compliance audits, especially under the 2026 CMS rule change, which raises the creditable coverage threshold from 60% to 72%.
So… Which Plan Is Right for You?
Small Business (under 50 employees)
→ Best fit: Fully Insured
→ Why: Simple administration, predictable monthly costs, and minimal compliance management.
Mid-Sized Employer (50–200 employees)
→ Best fit: Level-Funded
→ Why: Offers more control over plan design and potential refunds while maintaining predictable costs.
Large Employer (200+ employees)
→ Best fit: Self-Funded
→ Why: Maximum flexibility, data transparency, and potential long-term cost savings through customized plan design.
The “right” plan depends on your organization’s size, risk tolerance, and internal resources. But regardless of which plan type you choose, Part D Creditable Coverage Determinations are non-negotiable.
Where Creditable Fits In
Whether your plan is fully insured, level-funded, or self-funded, Creditable ensures you stay compliant - without the complexity.
We automate the entire determination process:
Actuarial-grade testing for any plan type
Instant, CMS-compliant documentation and notices
Centralized dashboard for brokers, TPAs, and HR teams
With 2026’s new CMS standards approaching, now is the time to make sure your plans are tested, documented, and audit-ready.
Stay compliant. Stay confident. Stay (in)Creditable.