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Self-Funded, Level-Funded and ICHRA Health Plans for Small Employers in Michigan (2027)
If you own a small business, a traditional "fully insured" group plan isn't your only choice. Business owners searching for "self-funded health plan broker," "level-funded plan" or "ICHRA" are looking at three ways to change who carries the risk and how much you control.
The four ways to cover employees
| Approach | How it works | Best fit |
|---|---|---|
| Fully insured group plan | You pay a fixed premium; the insurer pays all claims. | Owners who want simple, predictable costs. |
| Level-funded plan | You pay a fixed monthly amount that covers expected claims, admin and stop-loss insurance. If claims come in low, some plans return part of the surplus. | Smaller groups with mostly healthy employees. |
| Self-funded plan | The employer pays claims directly and buys stop-loss insurance to cap big claims. Costs swing with claims. | Larger groups with the cash cushion to absorb swings. |
| Allowance-style plan (ICHRA) | The employer gives each employee a tax-advantaged monthly allowance, and employees buy their own individual plan on or off the marketplace. | Owners who want a fixed budget, or have a mix of ages and locations. |
Know the trade-offs
- Level-funded and self-funded plans are usually medically underwritten, so a group with a few high claimants can see big price differences from the quote to renewal.
- Stop-loss rules vary by state. Some states limit how low stop-loss coverage can be set for small groups. Ask Michigan Department of Insurance and Financial Services (DIFS) or your agent what applies in Michigan.
- An ICHRA (individual coverage health reimbursement arrangement) has no minimum group size and sets your cost as the allowance you choose. Employees keep their plan if they leave the company.
- Admin load. Self-funded and ICHRA plans come with more paperwork than a standard plan. A good broker or administrator handles it.
What to ask any broker who pitches you one
- What happens at renewal if one employee has a large claim?
- What does stop-loss cover, and what's the limit per person?
- Who pays me back if claims are lower than expected, and when?
- Can you compare a fully insured option side by side?
Not ready to change anything? Start with health insurance for small business owners and what a broker or advisor does and costs. If you're a solo owner with no employees, you're treated as self-employed for individual coverage: see the freelancer guide.
Tell us your headcount and we'll walk through which structures make sense.
Frequently asked questions
What is a level-funded health plan?
A plan where the employer pays a fixed monthly amount that covers estimated claims, administration and stop-loss insurance. Some plans refund part of unused claims money at the end of the year.
What does ICHRA stand for?
Individual coverage health reimbursement arrangement. The employer sets a monthly allowance and employees use it to pay for individual health insurance they choose.
Is a self-funded plan right for a small business?
Usually only for larger groups with the cash to absorb claim swings. Many small employers use level-funded plans, which add a fixed monthly payment and stop-loss protection.