Understanding the Difference:
Fully Insured vs. Self-Funded vs. Level Funded Plans
Not all employer health plans work the same. When it comes to Part D Creditable Coverage Determinations, the type of plan you offer matters.
What are fully insured plans?
The employer buys a health insurance policy from a carrier (e.g., BCBS, UHC, Aetna).
The carrier takes on all the financial risk.
Who designs the plan?
The carrier.
Who pays claims?
The carrier.
Why it matters for Part D:
Carriers often provide creditable coverage status.
But they don’t always do it on time or accurately.
Still common, especially for smaller employers.
High level:
Lowest risk for employers
Easiest to administer
Least flexibility
What are self funded plans?
The employer pays the medical claims directly and takes on the financial risk.
A TPA (Third Party Administrator) or PBM handles administration and pharmacy benefits.
Who designs the plan?
The employer, sometimes with consultants or TPAs.
Who pays claims?
The employer.
Why it matters for Part D:
These plans do NOT automatically come with a creditable coverage determination.
They require actuarial testing to determine creditable status.
High risk for getting it wrong—especially with 2026 CMS changes.
High Level:
Maximum flexibility
Potential cost savings
Requires expertise and compliance
What are level funded plans?
A hybrid between fully insured and self-funded. Employers pay a fixed monthly amount (“level”) that includes:
Expected claims funding
Stop-loss insurance (to protect against big claims)
Administrative fees
If claims are lower than expected, the employer may get a refund at year-end.
Who designs the plan?
Carrier or TPA + employer.
Who pays claims?
Technically the employer but with stop-loss protection.
Why it matters for Part D:
Many people assume level-funded plans are fully insured. They’re not.
They often require an actuarial determination just like self-funded plans.
These are the fastest-growing plan type and often the most overlooked for compliance.
High Level:
More flexibility than fully insured
More predictable cost than self-funded
Potential refunds
Often misunderstood in compliance
Not always tested properly for Part D
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