Exiting the Insured Hotel: Why Employers Are Fleeing Fully Funded Plans
For years, fully insured health plans have operated like all-inclusive resorts. Everything bundled neatly under one roof, one monthly payment, and—at least on the surface—one less thing to worry about.
But in 2025, that illusion is breaking. According to a recent piece from Virtue Alliance, a growing number of employers—particularly in the mid-market—are checking out of the insured hotel. The reason? The room service isn’t worth the rate anymore.
Why Employers Are Leaving
Fully insured health plans used to promise simplicity and stability. But instead of peace of mind, employers are now facing:
Double-digit premium increases year over year
Minimal insight into how those dollars are spent
Little flexibility to design benefits around their population’s needs
And when claims spike or a high-cost condition emerges, the result is usually the same: renewal hikes and limited options. Employers feel punished for things they can’t control, and powerless to do anything about it.
As Virtue Alliance notes, this is especially painful for employers with 50 to 500 employees—the “messy middle” that’s too big to fly under the radar, but often too small to get real leverage with insurers.
The Rise of Self-Funding and Captives
As frustration grows, employers are increasingly drawn to alternatives—particularly level-funded and group captive plans. These models flip the script:
Employers get claims data, helping them understand what’s driving costs
Plan design becomes flexible, allowing for customization and proactive care strategies
Surplus sharing becomes real, not theoretical
Captives, in particular, are gaining momentum as a way for like-minded employers to band together, reduce volatility, and take control of their healthcare spend—without being exposed to full-blown risk like a jumbo employer.
What used to be seen as too complex or “only for big companies” is now becoming the smarter play for midsize employers with tight margins and a sharp eye on value.
What It Means for Brokers and Consultants
This isn’t a trend—it’s a reallocation of trust. Employers are voting with their feet and their funding models. The brokers and advisors who succeed will be those who help clients transition away from dependency and toward ownership.
That means:
Demystifying captives and stop-loss mechanics
Building confidence in claims data transparency
Helping clients design plans that align with culture and budget
Employers don’t want more vendors. They want guides who can lead them out of the noise and into something more sustainable.
Final Thought
Fully insured plans may still have a role, but they’re no longer the default. In a system riddled with complexity and cost opacity, the appeal of control is growing fast. Employers are realizing that comfort is not the same as value—and that the only way to fix healthcare, for their people and their business, is to take the driver’s seat.
