Level-funded plans and ICHRA are the two most popular alternative-funding strategies for 2026. In short: a level-funded plan is a group plan that refunds surplus when claims run low, while an ICHRA gives employees a fixed tax-free allowance to buy their own coverage. Level-funded suits healthy, concentrated groups; ICHRA suits dispersed or highly varied workforces that want fully capped costs.
Side-by-side comparison
| Factor | Level-Funded | ICHRA |
|---|---|---|
| How the employer pays | Fixed monthly payment covering claims, admin, and stop-loss; surplus refunded if claims run low. | Fixed monthly allowance per employee; the employer's cost never exceeds the allowance. |
| Who chooses the plan | Employer selects one group plan for everyone. | Each employee buys their own individual plan on the open market. |
| Cost predictability | Predictable monthly cost with upside if claims are low. | Completely fixed and predictable. |
| Best group size | Roughly 10–200 employees with healthy claims history. | Any size, especially dispersed or diverse workforces. |
| Employee experience | Familiar group-plan experience. | More choice, but employees shop for their own coverage. |
When level-funded wins
If your group is relatively healthy, concentrated in one or a few states, and you want employees to keep a traditional group-plan experience, a level-funded plan often delivers the best of both worlds: predictable monthly costs plus a refund when claims come in under budget. Learn more in our guide to level-funded health plans.
When ICHRA wins
If your workforce is spread across many states, your needs vary widely, or you want your benefits cost to be 100% fixed with zero claims exposure, an ICHRA is often the stronger fit. Read our full ICHRA explainer for the details.
How Nyala Health helps you decide
Because we are independent and not tied to any carrier, we model both strategies against your actual census, claims history, and local individual-market rates — then recommend whichever produces the best outcome for your business and your people.