Michigan small group insurers requested an average 9.6% rate increase for 2027 fully-insured plans, according to proposed rate filings reviewed by Crain's Grand Rapids Business. For a business already paying Michigan small group premiums, that increase lands on top of whatever their 2026 renewal already cost, a pattern also visible in Summit's state-by-state premium increase data. A level-funded plan is the main alternative Michigan employers ask about when a renewal like that arrives, and it is regulated differently than a standard fully-insured plan under Michigan law. If you have not yet requested quotes, Summit's group health insurance quotes checklist covers what to send a broker before comparing a level-funded option against a standard renewal.
What Is a Level-Funded Health Plan?
A level-funded health plan is a self-funded arrangement where the employer pays a fixed monthly amount, calculated in advance, that covers expected claims, stop-loss insurance premium, and administrative fees. If actual claims come in under the projected amount for the year, the employer typically gets some or all of the difference back. If claims run over, the stop-loss policy covers the excess above a set point, so the employer's maximum exposure is capped. Summit's full level-funded plan guide covers the general mechanics in more depth; this piece focuses on how Michigan regulates the arrangement specifically.
This is different from a fully-insured plan, where the employer pays a set premium regardless of the group's actual claims, and the carrier keeps any difference between premium collected and claims paid.
How Does Michigan Regulate Level-Funded Plans Differently From Fully-Insured Plans?
Michigan regulates the two very differently, and that difference is where the pricing advantage comes from. Under the Michigan Insurance Code, a fully-insured plan sold to a small group of 2 to 50 employees is subject to ACA community rating, meaning the carrier cannot price based on the group's health history, only on age, tobacco use, geography, and family size.
A level-funded plan is not priced that way. The stop-loss insurance policy that sits behind a level-funded plan can use limited medical underwriting, which means a group with a favorable claims history can see lower monthly costs than a community-rated fully-insured quote for the same group. Michigan DIFS requires every stop-loss policy sold to a Michigan employer to be filed and approved before an insurer can offer it, which is the regulatory backstop that keeps the underwriting within state limits.
Table: Michigan small group market, fully-insured vs. level-funded
| Feature | Fully-insured (2-50 employees) | Level-funded |
|---|---|---|
| Pricing basis | ACA community rating (age, tobacco, geography, family size) | Group claims history via stop-loss underwriting |
| Regulator | Michigan DIFS, ACA small group rules | Michigan DIFS, stop-loss policy filing |
| Refund potential | None | Possible, if claims run under projection |
| Typical minimum group size | No statutory minimum | Often 5 to 10 employees, varies by carrier |
| 2027 average filed increase | 9.6% (Crain's Grand Rapids Business, citing DIFS filings) | Varies by group claims, not a filed community rate |
Who Qualifies for a Level-Funded Plan in Michigan?
Most carriers set a minimum group size around 5 to 10 employees for a level-funded plan, though the exact threshold varies by carrier and is not set by Michigan statute. Michigan employers with 51 or more employees generally have even more flexibility choosing between level-funded and fully self-funded arrangements, since the ACA small group rules that apply to the 2-50 employee range no longer govern the group at that size.
Two Michigan carriers with employer-facing funding option programs that include alternatives to standard fully-insured coverage are Priority Health and Blue Cross Blue Shield of Michigan, both of which publish employer funding-option pages describing self-funded and level-funded structures for Michigan groups. A broker who works Michigan's small group market can confirm which specific carriers are quoting level-funded plans at a given group's size and claims profile, since availability shifts by carrier and by year.
What Does a Level-Funded Plan Actually Save a Michigan Employer?
Take a disclosed hypothetical: a Grand Rapids employer with 25 employees gets a fully-insured renewal quote reflecting the 9.6% average Michigan increase, bringing their premium to $550 per employee per month. A level-funded quote for the same group, based on a favorable claims history, comes back at $505 per employee per month with a maximum stop-loss exposure capped above that.
- Monthly savings per employee: $550 minus $505 equals $45
- Annual savings across 25 employees: $45 x 25 x 12 equals $13,500, before any year-end refund from unused claims funds
- Layering a Section 125 premium only plan on top, with employees contributing $150 a month pre-tax toward their share, adds employer FICA savings of $150 x 7.65% x 25 employees x 12 months, or about $3,443 a year
These figures are a disclosed hypothetical, not a quote. Every Michigan group's actual level-funded pricing depends on its own claims history, which is exactly the number a fully-insured community-rated quote does not use at all. Summit's FICA savings math and Section 125 savings calculator can run the payroll side of this against your own Michigan census.
Frequently Asked Questions
Is a level-funded health plan legal in Michigan?
How many employees does a Michigan business need for a level-funded plan?
Why are Michigan small group health insurance rates rising in 2027?
Does a level-funded plan give Michigan employers a refund if claims are low?
Can a Section 125 plan run alongside a level-funded health plan in Michigan?
What happens if a Michigan employer's level-funded plan has a bad claims year?
Sources: Michigan Department of Insurance and Financial Services (DIFS), 2027 proposed rate change filings; Crain's Grand Rapids Business, Michigan small business 9.6% health insurance rate hike report (2026); Michigan Insurance Code, small group ACA community rating provisions; IRS Publication 15-B (2026), FICA treatment of pre-tax payroll deductions.