Vision Benefits: The Most Widely Offered Ancillary Benefit Employers Get the Least Credit For

Vision is the most commonly offered ancillary benefit in employer-sponsored plans — 89% of employers offer it nationally, higher than dental, higher than life insurance, and higher than any voluntary benefit. And yet vision is also one of the most underfunded benefits in the market. The average employer contributes $3 per month toward a single employee’s vision premium. For a family, the average is $6.

That disconnect — near-universal offer rate, near-zero employer contribution — is the central story in vision benefits today. Employees enroll in vision at a 74% rate when it’s offered, making it a high-utilization benefit. But the financial signal most employers are sending through their contribution level is that vision is an afterthought: available, but not invested in. This piece covers the national benchmarks on offer rates, plan structure, contributions, coverage design, and the carrier market so employers can see exactly where their vision program stands.

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Offer Rates and Plan Structure

Vision is offered by 89% of employers nationally — the highest offer rate of any ancillary benefit. Among those who offer it, 74% of eligible employees enroll. That utilization rate is significant: nearly three out of four employees who are given access to vision coverage use it, which means the benefit is genuinely visible to your workforce. Employees notice when they use a benefit and when their coverage is adequate or not.

On plan structure, vision is even simpler than dental. A strong majority of employers offer a single vision plan — 95% nationally. Two-plan structures are rare, and three or more plans are essentially nonexistent. Vision plan design is standardized enough that a single well-designed plan serves most workforce demographics without requiring the complexity of a buy-up option. The decision is less about how many plans to offer and more about whether the single plan you offer is adequately structured.

Employer Contribution: A Market-Wide Gap

Vision employer contributions are low across the board, and that’s not unique to any particular employer — it’s a market-wide pattern. The national breakdown:

• 17% of employers pay 100% of the vision premium (full contribution)

• 42% of employers pay a portion of the premium (partial contribution)

• 41% of employers pay nothing toward the vision premium (no contribution)

The 41% contributing nothing stands out — it’s materially higher than the comparable figure for dental (26%). Nearly half of all employers offering vision are passing the entire cost to employees. Among those who do contribute, the averages are modest: $3 per month for single coverage and $6 per month for family coverage, representing 50% of the single premium and 36% of the family premium.

The total vision premium is low enough that the contribution gap may seem inconsequential in isolation: $7 per month for single coverage, $21 per month for family. But the contribution pattern sends a signal that employees read into the broader benefits package. An employer covering 50% of a $7 single premium — a $3.50 monthly contribution — is technically contributing, but the gesture is so small it barely registers. Employers who cover vision premiums in full, or contribute at a meaningful level, stand out against a market where most employers are doing the minimum.

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Plan Design: What Vision Coverage Actually Covers

Vision benefits are structured around a set of specific coverage elements: the annual eye exam, corrective lenses (glasses or contacts), and frames. Understanding how each element is designed — and how frequently coverage refreshes — is where meaningful plan differences emerge.

Copayments

Vision plans typically use copayments rather than coinsurance at the point of service. The national benchmarks:

• Eye exam copay: $10 (national average)

• Materials copay (frames and lenses): $25 (national average)

A $10 exam copay and $25 materials copay are well-established market standards. Employers above these benchmarks — charging $25 for an exam or $50 for materials — are meaningfully above the market norm on employee cost-sharing for a benefit that costs very little to provide generously.

Lens and Contacts Reimbursement

For corrective lenses and contact lenses, plans reimburse up to a maximum allowance. The national benchmarks by percentile:

• 25th percentile: $130 maximum reimbursement

• 50th percentile (median): $150 maximum reimbursement

• 75th percentile: $150 maximum reimbursement

The tight clustering at the 50th and 75th percentiles — both at $150 — reflects how standardized vision reimbursement levels have become. The median and the 75th percentile are the same number, which means the majority of competitive vision plans land at or near $150 for lens reimbursement. An employer with a $100 allowance is visibly below market; an employer at $150 is squarely competitive.

Contacts Coverage

Contact lens coverage comes in two structures, and the difference matters for employees who wear contacts exclusively:

• In lieu of frames: $80 average maximum reimbursement — applies when the employee chooses contacts instead of glasses

• In addition to frames: $18 average maximum reimbursement — applies when the employee wants both

The in-lieu-of-frames structure is the more important benchmark for contact lens wearers. An $80 allowance is the national average, but contact lens costs can easily exceed that — a year’s supply of daily disposable contacts often runs $400–$800 before any reimbursement. Employers evaluating their vision plan should check both the contacts allowance and whether the plan requires contacts to be used in lieu of frames or allows both.

Coverage Frequencies: When Benefits Refresh

Vision plans specify how frequently each benefit type refreshes — how often employees can get a new exam, new lenses, and new frames under the plan. This is one of the most variable design elements across vision plans, and one employees frequently compare:

• Eye exams: 96% of plans refresh annually (12 months); 1% refresh every 24 months

• Lenses: 93% refresh annually (12 months); 4% refresh every 24 months

• Frames: 41% refresh annually (12 months); 56% refresh every 24 months

The frames frequency is the most differentiated element. A majority of employers refresh frame benefits every 24 months — meaning employees can get new frames every other year. The 41% who refresh frames annually are offering a more generous benefit in a category employees notice, since frames are both a functional and aesthetic item that employees actively choose. Annual frame refresh is a low-cost way to differentiate a vision plan from the majority of the market.

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How Larger Employers Approach Vision Funding

Like dental, vision benefits are fully insured for the vast majority of employers — the employer pays a fixed monthly premium, the carrier assumes the claims risk, and the administrative relationship is simple. This is appropriate for most organizations, particularly those without the scale to make self-insured vision economically meaningful.

For larger employers, self-insured vision follows a similar logic to self-insured dental: vision claims are highly predictable, low in severity, and consistent year over year. At sufficient scale, the carrier’s built-in risk margin becomes a visible cost that can be recaptured through direct claims funding. Self-insured vision adoption follows the same employer-size curve as dental — low among small employers and growing significantly as covered-life counts increase, with the most meaningful adoption among employers with 250 or more covered lives.

As with dental, the most common path to self-insured vision at large employers is through the medical plan. When a large employer moves to an ASO arrangement for medical with a major carrier, vision is frequently bundled into the same structure — administered by the same carrier, using the same TPA infrastructure, with the employer funding claims directly. The major medical carriers — UnitedHealthcare, Aetna, Cigna, and the BCBS plans — all offer vision as part of bundled ASO arrangements for large employer groups. This explains why major medical and group insurance carriers appear alongside dedicated vision carriers in the market share data: the two are often linked at the administrative level for large accounts.

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The Carrier Market: Who Administers Vision Benefits

The vision carrier market divides into two segments: dedicated vision carriers that specialize in vision benefits, and group insurance and medical carriers that offer vision as part of a broader benefits portfolio.

Vision Service Plan (VSP) is the largest dedicated vision carrier in the country by both employer count and participant count. VSP operates as a not-for-profit and has built one of the largest provider networks in the vision market, which is a meaningful advantage for employers with geographically dispersed workforces. EyeMed, owned by Luxottica (the parent company of LensCrafters, Pearle Vision, and Sunglass Hut), offers broad retail network access as a differentiator — particularly for employees who prefer the convenience of in-store vision care. Both VSP and EyeMed are purpose-built for vision and offer strong plan design flexibility.

Guardian Life is a major group insurance carrier with a strong vision product alongside its dental, life, and disability offerings. Guardian’s presence in vision reflects its model of offering bundled ancillary products to employers who want to consolidate their ancillary carrier relationships.

The participant-count view of the carrier market shifts noticeably from the employer-count view. Fidelity Security Life and Sun Life appear prominently when measured by participants but are smaller by employer count — a pattern similar to what we see in dental, reflecting their disproportionate presence at large employer accounts. Carriers like Sun Life often enter the vision market through bundled ancillary arrangements with large employers who are already Sun Life customers for stop-loss or group life, giving them access to high-headcount accounts without broad employer-count market share.

For employers evaluating their vision carrier, the key considerations are network access (VSP and EyeMed have the broadest provider networks nationally), retail network options (EyeMed’s retail presence is a genuine differentiator for employees who prefer in-store care), and whether bundling vision with dental or medical creates administrative efficiencies. As with dental, employers who are not bundling through a medical ASO arrangement have full flexibility to select the best-fit vision carrier independently.

What Employers Should Be Asking About Their Vision Plan

Vision is a low-cost benefit relative to medical, which means the gaps between a below-market plan and a competitive one are correctable at modest expense. The key questions:

• Employer contribution: Are you in the 41% contributing nothing toward the vision premium? The total premium is $7 for single coverage — covering it entirely costs less than a lunch per employee per month. If you’re contributing nothing, the cost to move to full contribution is minimal and the signal it sends is meaningful.

• Frames frequency: Do you refresh frames annually or every two years? The majority of the market is at 24 months, which means annual frame refresh is a genuine differentiator at low cost.

• Lens and contacts reimbursement: Are you at or above the $150 median for lens reimbursement? Is your contacts-in-lieu allowance at or above the $80 national average?

• Exam and materials copays: Are your copays at or below the $10/$25 national benchmarks? Above-market copays on a low-cost benefit are a visible friction point employees notice at every appointment.

• Carrier and network: Does your current carrier’s network cover the geographies where your employees actually live and work? Network gaps in vision are one of the most common employee complaints about vision benefits.

See How Your Vision Plan Compares to Employers Like You

Most employers don’t know whether their vision plan is above or below market — because they’ve never seen it benchmarked against employers who actually look like them. A national average tells you very little. What matters is how your vision contribution, your coverage design, and your carrier compare against other employers in your industry, your region, and your size band.

Mployer rates your vision plan as part of the Ancillary pillar score — evaluated against a custom cohort matched to your specific industry, region, and employer size. Whether you’re a 75-person technology company in the Southeast or a 500-person manufacturing employer in the Midwest, the benchmark that matters is the one built from employers who are actually competing with you for the same people.

See how your vision plan — and your full benefits package — compares to your custom cohort at MployerAdvisor.com.

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_Sources

_{Mployer 2025 and 2026 Employee Benefit Plan Design Study, covering 50,000+ employer plans. All Size Average, All Region Average, All Industries.}

_{Carrier market share data sourced from Catalyst, a leading analytics platform for carrier market share in the benefits industry. Data reflects fully insured vision plans; market share patterns are broadly representative of self-insured vision plans as well.}

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Dental Benefits: Small Dollar, High Visibility

Dental benefits are not your largest cost center. For most employers, dental represents a fraction of what medical costs per covered employee annually. But dental is one of the highest visibility benefits in your package: employees use it, notice it, and talk about it. When it’s good, it builds goodwill. When it’s inadequate (low maximums, no orthodontia, zero employer contribution) it registers as a signal that the employer isn’t invested in the total package.

Nationally, 71% of employers offer dental benefits, and among those who do, 73% of eligible employees enroll. That utilization rate is among the highest of any ancillary benefit, meaning when you offer dental, your employees are actively using it. This piece covers the national benchmarks on offer rates, contribution structures, plan design, coinsurance, premiums, and the carrier market so employers can see exactly where their dental program stands.

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Who Is Offering Dental — and How Many Plans

Seventy-one percent of employers offer dental benefits nationally. That number climbs significantly with employer size; dental is near-universal at large employers and becomes less consistent as you move into smaller organizations. Among employers that do offer dental, 73% of eligible employees enroll, making it one of the most-utilized ancillary benefits in the market.

When it comes to plan structure, simplicity dominates. Most employers offer a single dental plan. A meaningful share offers two plan options, typically a base plan and a buy-up with higher maximums or orthodontia coverage. Very few offer three or more plans. For most employers, one well-designed plan is both administratively simpler and more valued by employees than offering multiple options that create confusion at open enrollment.

The decision about how many plans to offer often comes down to workforce demographics. Employers with a broad age range, particularly those with significant populations in their 30s and 40s with children, often find that a two-plan structure with orthodontia as a buy-up generates strong employee satisfaction at relatively modest additional cost.

Employer Contribution: Where Most Plans Fall Short

Employer contribution to dental premiums is the single most variable element of dental plan design, and the one most likely to affect how employees perceive the benefit. The national picture breaks into three groups: a small share of employers cover the full premium; nearly two-thirds contribute partially, and roughly one in four contributes nothing at all.

That last group is worth examining. Employers contributing nothing are offering dental access (the network, the negotiated rates, the plan structure) but passing the entire premium cost to employees. For a single employee, the average total monthly dental premium is $35. That’s not a large number in isolation. But an employer paying none of that $35 is making a statement, and employees notice.

Among employers who do contribute, the average employer contribution is $21 per month for single coverage and $49 per month for family coverage. As a percentage of the total premium, employers are covering a meaningfully larger share of single coverage than family coverage. For employees with families, this percentage gap accumulates into real dollars over the course of a plan year.

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Plan Design: Deductibles, Maximums, and Coinsurance

Dental plan design follows a consistent national structure, which makes benchmarking straightforward. The standard architecture involves an annual deductible, a coinsurance schedule by service category, and an annual maximum benefit.

Deductibles

The national average in-network deductible is $50 for single coverage and $150 for family. Dental deductibles are low by design; they exist to discourage unnecessary utilization rather than to shift meaningful cost to employees. An employer with a $100 or $150 single deductible is above market and should expect employees to notice the difference.

Annual Maximum

The annual maximum benefit, the total the plan will pay per member per year, is where employer generosity has the most visible impact. The national average annual maximum is $1,500. Employers with a $1,000 annual maximum are below market. A single crown or a root canal and crown combination can easily approach or exceed $1,500 on its own, meaning an annual maximum that’s too low leaves employees with significant out-of-pocket exposure in any year they need meaningful dental work.

The orthodontic lifetime maximum follows the same benchmark. The national standard is $1,500. For families with children in orthodontic treatment, where total treatment costs typically range from $4,000 to $8,000, a lifetime maximum of $1,000 or less is materially below what the market provides.

Coinsurance by Service Category

Dental coinsurance determines what percentage of covered services the plan pays after the deductible is met. The national benchmarks are consistent:

• Preventative care (cleanings, X-rays, exams): 100% - the plan covers in full, virtually universal

• Basic services (fillings, simple extractions): 80% - employer pays 80%, employee pays 20%

• Major services (crowns, bridges, dentures, root canals): 50% - employer and employee split equally

• Orthodontics: 50% - for employers that include orthodontic coverage

These benchmarks are consistent enough nationally that departing from them in either direction is a meaningful signal. An employer covering 60% on major services is offering a richer plan. An employer at 40% on basic services is below market in a category employees use every year.

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Orthodontia: No Longer Just for Kids

Orthodontic coverage has historically been viewed as a pediatric benefit, something offered for children and teenagers in braces. That framing is increasingly outdated. According to the American Association of Orthodontists, nearly one in three orthodontic patients today is an adult, an all-time high. Adults in their 20s, 30s, and 40s are seeking orthodontic treatment in growing numbers, driven by the availability of discreet options like clear aligners and a broader recognition that orthodontic health has long-term dental and functional benefits beyond cosmetics.

Among employers that offer dental, the orthodontia picture nationally breaks into two groups: those who extend coverage to adults and children, and those who limit it to children only. The majority of employers who offer orthodontia restrict it to children, which reflects the benefit’s traditional framing. A meaningful share have extended coverage to adults, responding to workforce demographics where employees in their 30s and 40s are themselves seeking treatment.

For employers evaluating whether to add or expand orthodontia coverage, the economics are more manageable than many assume. Orthodontic claims are spread over multi-year treatment periods; utilization rates are moderate, and the lifetime maximum cap ($1,500 nationally) limits the employer’s maximum exposure per covered individual. For a workforce with meaningful family enrollment, particularly one with a younger-to-mid-career demographic where both children and adults are likely candidates for treatment, orthodontia coverage is often one of the highest-perceived-value additions available at moderate incremental cost.

How Larger Employers Approach Dental Funding

Most dental benefits, particularly for small and mid-size employers, are fully insured. The employer pays a fixed premium to a dental carrier, the carrier assumes the claims risk, and the administrative relationship is straightforward. This is the right model for the majority of employers, particularly those without the covered-life volume or administrative infrastructure to take on claims risk directly.

For larger employers, however, dental is frequently self-funded through an ASO (Administrative Services Only) arrangement, the same model increasingly common in medical. The reason is straightforward: dental claims are high-frequency and low-severity, which makes them highly predictable at scale. When an employer has several hundred or more covered dental lives, the year-to-year claims variation is manageable, the carrier’s built-in risk margin and profit load become visible as a cost that can be recaptured, and the economics of direct claims funding often become compelling.

A common pathway to self-funded dental is through the medical plan. Many major carriers, including UnitedHealthcare, Aetna, Cigna, and Blue Cross Blue Shield plans, offer bundled ASO arrangements where dental (and often vision) are administered alongside the self-funded medical plan. When a large employer makes the decision to self-fund their medical plan, dental frequently follows as part of the same transition, simply because the carrier relationship, the TPA infrastructure, and the ASO fee structure are already in place. This is part of why the carrier market for self-funded dental looks like the major medical ASO market, the two are often linked at the administrative level.

For employers in this category, self-funded dental through an ASO arrangement allows full plan design flexibility, access to the carrier’s dental network on a rental basis, and the retention of surplus in years where claims come in below projections. The administrative fee is typically charged on a per-employee-per-month basis, and the employer funds claims directly as they are incurred.

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The Carrier Market: Who’s Administering Dental Benefits

The dental carrier market reflects two distinct segments: dedicated dental carriers that specialize exclusively in dental benefits, and major medical carriers that offer dental as part of a broader benefits suite. Understanding both matters when evaluating your dental carrier relationship.

Delta Dental is the largest dedicated dental carrier in the country, with one of the broadest provider networks nationally and strong penetration across employer sizes. Guardian Life and Sun Life are also major dental-focused carriers with deep expertise in dental plan design and administration. These carriers have built their businesses around dental and typically offer the most flexibility in plan design, network options, and dental-specific administrative tools.

Alongside the dedicated dental carriers, major medical carriers (MetLife, Cigna, Aetna, and the BCBS plans) are significant players in the dental market. Their presence is explained in part by the bundling dynamic described above: large employers who self-fund their medical through an ASO arrangement with UnitedHealthcare, Aetna, or Cigna frequently bundle dental administration into the same relationship. This gives the major medical carriers a built-in distribution advantage at large employer accounts, which is reflected in how they rank by participant count versus employer count. A carrier that appears mid-sized by employer count can be considerably larger when measured by covered lives, because the accounts they serve tend to be large.

For employers evaluating their dental carrier, the key considerations are network breadth (particularly important for geographically dispersed workforces), plan design flexibility, administrative tools and member experience, and whether a bundled arrangement with an existing medical carrier creates efficiencies or constrains options. Employers who are not self-funding medical have more flexibility to select the best-fit dental carrier independently, and should use it.

What Employers Should Be Asking About Their Dental Plan

The dental benchmarks above provide a clear framework for evaluating your current plan. The key questions:

• Annual maximum: Is your plan at $1,500 or above? If you’re at $1,000, you’re below market in the category most likely to generate employee out-of-pocket frustration.

• Employer contribution: Are you in the group contributing nothing toward the premium? If so, do you know how that compares to your direct talent competitors? A modest monthly contribution moves you from the bottom of the market to competitive at minimal cost.

• Orthodontia: Do you offer it, and for whom? Given that nearly one in three orthodontic patients today is an adult, a children-only orthodontia benefit is leaving a meaningful segment of your workforce without coverage they increasingly value.

• Major services coinsurance: Are you at the 50% market standard on major services? If you’re below that, employees with significant dental needs are absorbing more than the market requires.

• Carrier relationship: When did you last go to market on your dental carrier? Dental is one of the more competitive carrier markets, and premium pricing, network quality, and administrative tools vary enough that an occasional review is warranted.

Know Where Your Dental Plan Stands

Dental benefits are one of the most benchmarkable categories in benefits, the data is clean, the market standards are well-established, and the gaps between employers are meaningful and correctable. An employer with a $1,000 annual maximum contributing nothing toward the premium is not just below market; they are in a position that employees notice and mention.

Mployer’s benefits rating evaluates dental offer rates, employer contribution levels, plan design, and coinsurance as part of the Ancillary pillar score, benchmarked against employers in your industry, region, and size band.

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Curious to see how your benefits compare? Submit your plan documents to get started.

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_Sources

_{Mployer 2025 and 2026 Employee Benefit Plan Design Study, covering 50,000+ employer plans. All Size Average, All Region Average, All Industries.}

_{American Association of Orthodontists (AAO): nearly 1 in 3 orthodontic patients is now an adult, an all-time high.}

_{PeopleKeep: ASO arrangements available for health, dental, and vision care benefits.}

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Understanding How Your Health Plan Is Funded Matters More Than Most Employers Think

How an employer funds its health plan sits quietly in the background of every benefits decision. Most CHROs and CFOs know their premium cost. Fewer understand the mechanics of how their plan is actually structured: who holds the risk, who administers the claims, how costs flow, and what flexibility, if any, they have to change any of it.

This post is not an argument for any particular funding model. It is an explanation of how each one works, what the national data shows about adoption by employer size, the key terms you need to understand, and the questions worth asking at your next renewal, whether you are fully insured today and want to stay that way, or whether you want to understand what moving to a different model would actually involve.

One important framing note upfront: funding model decisions are not one-size-fits-all. Fully insured arrangements are the right choice for a significant portion of employers, particularly smaller organizations, because the risk transfer and administrative simplicity is genuinely valuable. The goal here is clarity, not a prescription.

The Three Funding Models: What They Actually Mean

Nationally, 60% of employers are fully insured, 14% are level-funded, and 26% are self-funded, according to Mployer’s 2026 plan data covering 50,000+ employers. But those percentages look very different when you break them out by employer size. Among employers with fewer than 50 employees, fully insured is nearly universal while level-funded and self-funded require a minimum threshold of covered lives to be actuarially viable. The self-funded number rises sharply as employer size grows: roughly 27% of firms with 100–199 employees self-insure, compared to over 90% of firms with 5,000+ employees (DOL).

Fully Insured

The employer pays a fixed monthly premium to a carrier. The carrier assumes all financial risk for claims, manages the network, processes claims, and handles member services. The employer knows their cost in advance, there are no surprises if utilization spikes, but there is also no upside if the workforce has a healthy year. Premium increases at renewal are driven by the carrier’s projections, not the employer’s actual claims experience.

Per Member Per Month (PMPM) costs under fully insured arrangements include the carrier’s built-in risk margin and profit load, typically estimated at 10–15% of premium above what actual claims would cost. For a 200-person employer paying $700 PMPM in premium, that margin can represent $140,000–$210,000 per year in cost that never returns to the employer regardless of utilization. Fully insured is the right choice when an employer values predictability and simplicity above all else, or when their workforce is too small to absorb claims risk directly.

Level-Funded

Level-funded plans are the middle ground that has expanded significantly in the past decade, particularly for mid-size employers. The employer pays a fixed monthly amount, similar to a fully insured premium, but that payment is split into three components: a claims fund (to pay expected claims), a stop-loss premium (to cover catastrophic claims above a threshold), and an administrative fee. If actual claims come in below the funded level, the employer receives a refund of the surplus at year-end.

The average individual stop-loss deductible for level-funded plans is $46,318, meaning the employer’s claims fund absorbs the first $46,318 of any individual’s claims before stop-loss coverage kicks in. Level-funded plans give employers their first look at actual claims data, something a fully insured employer never sees, which is often the most valuable outcome of making the switch, independent of any refund.

Self-Funded (Self-Insured)

In a self-funded arrangement, the employer pays claims directly as they are incurred rather than paying a fixed premium. A third-party administrator (TPA) or carrier handles plan administration (network access, claims processing, member services),while the employer retains the financial risk. Stop-loss insurance caps the employer’s exposure on catastrophic individual claims and, optionally, on aggregate plan-wide costs.

The average individual stop-loss deductible for self-insured plans is $141,938, three times the level-funded equivalent, reflecting the higher risk tolerance required to make self-funding economically viable. PMPM costs in self-funded plans are highly variable month to month because costs track actual claims rather than a fixed premium. In a good year, a self-funded employer pays less than they would have under a fully insured arrangement. In a bad year, one with high utilization or a catastrophic claim, stop-loss coverage is what prevents the plan from becoming a financial crisis.

Key Terms Every CHRO and CFO Should Know

Benefits funding conversations move quickly into jargon. These are the terms that matter most:

• PMPM (Per Member Per Month): The standard unit for measuring health plan costs. Total annual plan cost divided by total member months. Used to compare costs across plans, funding structures, and years. A fully insured employer often doesn’t know their PMPM, a self-funded employer tracks it monthly.

• Stop-Loss Insurance: Insurance purchased by self-funded and level-funded employers to cap their claims exposure. Specific stop-loss covers individual catastrophic claims above a deductible. Aggregate stop-loss covers total plan costs that exceed a set percentage of expected claims (typically 120–125%). Nationally, 92% of self-funded employers carry specific-only stop-loss; 8% carry both specific and aggregate.

• Specific Stop-Loss Deductible: The per-person threshold above which the stop-loss carrier begins reimbursing claims. Level-funded average: $46,318. Self-insured average: $141,938. Setting this number too high exposes the employer to more risk per claim; too low raises the stop-loss premium.

• TPA (Third-Party Administrator): An independent organization that administers a self-funded plan, processing claims, managing networks, and handling compliance. 73% of self-funded employers use a TPA. TPAs are carrier-agnostic and give employers more flexibility in how they assemble their plan.

• ASO (Administrative Services Only): An arrangement where a major carrier (UnitedHealthcare, Aetna, Cigna, BCBS) administers the plan while the employer retains financial risk. 27% of self-funded employers use ASO. Provides access to the carrier’s national network and integrated services.

• Run-Out Claims: Claims incurred before a plan year ends but submitted after. A critical concept when switching funding structures, an employer moving from fully insured to self-funded must account for run-out liability from the prior plan year.

• Lasering: A stop-loss carrier practice of excluding a specific high-cost individual from coverage, or charging a higher deductible for them, at renewal. Common for known catastrophic claimants. Employers should understand their stop-loss carrier’s lasering policy before selecting a deductible.

• Aggregate Risk Corridor: The band above expected claims before aggregate stop-loss kicks in, typically 120–125% of projected costs. An employer with $10M in expected claims and a 1.22 corridor absorbs the first $12.2M before aggregate coverage begins.

Plan Administration: TPA vs. ASO and How Vendors Fit Together

One of the most underappreciated aspects of moving to a self-funded model is that it separates plan administration from plan financing. Under a fully insured arrangement, the carrier does both. Under a self-funded arrangement, the employer can assemble a best-of-breed stack: choosing a TPA for administration, a separate stop-loss carrier for risk protection, a PBM for pharmacy, and a network rental arrangement for provider access. That modularity is both the primary advantage and the primary complexity of self-funding.

Third-Party Administrators (TPAs)

TPAs administer the day-to-day operations of a self-funded plan without carrying any of the insurance risk. They process claims, manage member ID cards, handle appeals, provide reporting, and ensure compliance. Because they are carrier-agnostic, employers using a TPA can select their network, stop-loss carrier, and PBM independently. Key TPA vendors in the market include:

• Imagine360 — self-funded and reference-based pricing specialist; strong mid-market focus

• Allied Administrators — independent TPA with regional strength and flexible plan design

• Trustmark — TPA with integrated level-funded and self-funded products

• Benefit Administration Company (BAC) — mid-market TPA with stop-loss relationships

• Sun Life — major stop-loss carrier that also provides TPA services and data analytics

Administrative Services Only (ASO) Carriers

Under an ASO arrangement, the employer accesses a major carrier’s infrastructure — their provider network, claims processing systems, and member services, while self-funding the actual claims. The primary advantage is network breadth: UnitedHealthcare, Aetna, Cigna, and the Blue Cross Blue Shield plans have national networks that most TPAs cannot replicate. The tradeoff is less plan design flexibility and, typically, less direct access to claims data. ASO is the most common path for large employers who want the benefits of self-funding without building an entirely independent plan infrastructure.

Carving Out Vendors: Where Employers Have the Most Leverage

One of the most powerful moves available to self-funded and level-funded employers is selectively replacing the default vendor stack with purpose-built alternatives. The most common carve-outs:

• PBM Carve-Out: Most ASO carriers bundle their own PBM (UHC uses OptumRx, Aetna uses CVS Caremark, Cigna uses Express Scripts). Employers can carve out the PBM and contract directly with an independent pharmacy benefit manager, often achieving better rebate pass-through and lower net drug costs. Employers with 500+ covered lives typically have the leverage to negotiate meaningfully. Independent PBMs like Capital Rx, Navitus, and SmithRx are built specifically for transparent, pass-through pricing models.

• Specialty Pharmacy Carve-Out: Specialty drug spend (oncology, biologics, GLP-1s) is the fastest-growing cost component in most plans. Carving specialty pharmacy to a dedicated specialty PBM or white-bagging program, where drugs are dispensed through the employer’s preferred channel rather than a hospital pharmacy, can generate material savings on a small number of high-cost claimants.

• Centers of Excellence (COE) Carve-Out: For high-cost procedures like joint replacement, cardiac surgery, bariatric surgery, and oncology treatment, employers can steer members to designated high-quality, lower-cost providers. COE programs through vendors like Included Health, Transcarent, and the major carrier networks have demonstrated both quality improvements and cost reductions for self-funded employers.

• Mental Health / EAP Carve-Out: Traditional EAPs have low utilization and limited clinical depth. A growing number of self-funded employers are carving out behavioral health to dedicated platforms (i.e. Lyra Health, Spring Health, Headspace Health) that offer broader access and measurable utilization outcomes.

• Stop-Loss Carve-Out: ASO carriers often offer stop-loss as part of their package. Self-funded employers can go to market independently with stop-loss carriers (i.e. Sun Life, Tokio Marine HCC, Voya, Symetra) to find better rates, higher deductibles, or more favorable lasering terms.

Each carve-out adds administrative complexity and requires coordination between vendors. The benefit of a TPA is that it can serve as the integrating layer, managing data feeds, eligibility, and claims adjudication across a multi-vendor stack. For employers considering their first carve-out, the PBM is usually where the most immediate financial opportunity exists.

High-Cost Claimants and What the Stop-Loss Data Shows

For any self-funded or level-funded employer, understanding high-cost claimant dynamics is essential. A single member with a catastrophic diagnosis, a premature birth requiring NICU care, an oncology case requiring immunotherapy, or a rare disease requiring gene therapy, can represent more claims cost than dozens of average members combined.

The stop-loss reimbursement data illustrates how the financial burden of large claims is distributed between employers and their stop-loss carriers:

• Claims under $1M: 41% reimbursed by stop-loss, employers absorb the majority

• Claims $1M–1.5M: 60% reimbursed, stop-loss begins to shoulder more

• Claims $1.5M–2M: 62% reimbursed

• Claims $2M–3M: 71% reimbursed

• Claims over $3M: 82% reimbursed, stop-loss is covering the vast majority

The practical implication: stop-loss coverage is most valuable at the extremes. Below $1M in total claims, the employer is absorbing nearly 60 cents of every dollar. Above $3M, the stop-loss carrier is covering 82%. Setting the right specific stop-loss deductible is therefore a meaningful financial decision, higher deductibles reduce stop-loss premiums but increase the employer’s per-incident exposure.

The composition of those high-cost claims matters too. Nationally, 71% of high-cost claim dollars are medical and 29% are pharmacy. That pharmacy share is rising. Specialty drugs, like particularly oncology therapies, biologics, and increasingly GLP-1 medications, are driving the Rx portion higher year over year. For self-funded employers, a specialty drug claim for a single member can now approach or exceed the average $141,938 stop-loss deductible in a single plan year. This is why formulary design, specialty pharmacy strategy, and stop-loss adequacy are increasingly interconnected decisions rather than separate ones.

What to Consider If You Are Fully Insured and Want to Understand Your Options

Moving from fully insured to level-funded or self-funded is not a decision to make lightly. It requires the employer, their CFO, their CHRO, and their broker or consultant to answer a set of questions honestly before modeling the economics:

• Size: Do you have enough covered lives to make the model actuarially viable? Level-funded is generally accessible at 25–50+ lives. True self-funding typically requires 100+ covered lives to carry meaningful claims risk, and 200+ before the economics are compelling without level-funded guardrails.

• Cash flow: Can your organization absorb monthly claims variance? Self-funded plans pay claims as incurred; a bad month is a real cash event, not just a future premium increase. Stop-loss reimbursement typically runs 30–90 days after the claim is paid, creating a temporary cash flow gap.

• Risk tolerance: Is your leadership prepared for year-to-year cost variability? Self-funding can produce meaningful savings in good years and meaningful overruns in bad ones. The multi-year economics almost always favor self-funding at sufficient scale, but the path is not smooth.

• Administrative capacity: Self-funded plans require more active management, including stop-loss renewals, TPA oversight, claims audits, and compliance filings. Your broker or consultant needs to have genuine self-funded expertise, not just familiarity with the concept.

• Data readiness: The primary non-financial benefit of self-funding is access to your own claims data. Are you prepared to actually use that data to make plan design decisions? Employers who self-fund without using their claims data are paying for a capability they’re not capturing.

• Run-out liability: When leaving a fully insured arrangement, the employer is responsible for claims incurred during the fully insured period but submitted afterward. This run-out must be accounted for in the financial model, it is often the surprise that derails first-year self-funded economics for employers who didn’t plan for it.

If the answers to these questions are uncertain, level-funded is almost always the right first step. It provides the refund upside and data transparency of self-funding with the fixed monthly cost and administrative simplicity of fully insured. For many employers in the 50–250 life range, level-funded is not a stepping stone, it is the right permanent answer.

The Point Is Not Which Model; It’s Whether You Know What You’re In

The most important outcome of understanding plan funding is not deciding to switch models. It is being able to have an informed conversation with your broker, your CFO, and your board about what you’re paying, what you’re getting, and what the alternatives look like.

An employer who has been fully insured for ten years and has never modeled a level-funded alternative does not know what that decision is costing them. An employer who is self-funded but has never analyzed their claims data does not know what that structure is worth. In both cases, the answer starts with a benchmark, knowing where your plan sits relative to employers who actually look like you.

Mployer’s benefits rating evaluates plan funding structure, stop-loss levels, and PMPM costs as part of the Medical pillar score, so employers can see not just what they’re paying, but how that compares to their custom cohort.

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Curious to see how your benefits compare?

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Or Schedule a Demo to get started.

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Sources

Mployer 2025 and 2026 Employee Benefit Plan Design Study, covering 50,000+ employer plans.

Stop-Loss Snapshot: Sun Life stop-loss quote requests, all size average. Segmented by employer size.

KFF 2025 Employer Health Benefits Survey. Average annual premiums: $9,325 single / $26,993 family.

U.S. Department of Labor: self-funding adoption by employer size. 27% of firms 100–199 employees; 90%+ of firms 5,000+ employees.

Mercer 2025 National Survey of Employer-Sponsored Health Plans: average total plan cost $17,496 PEPY; projected to exceed $18,500 in 2026.

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