Illinois case study: 5-employee firm halves its health premium with a level-funded PPO

What was this Illinois company paying, and why did the bill keep climbing?

The company was paying about twice what it paid in 2022, for the same five people and the same plan. It is a five-employee business based in Illinois. Two employees work in Illinois, and the other three work remotely, one each in Kansas, Washington and California. The owner asked us not to publish the company’s name.

The team was on a fully insured ACA small-group PPO from Blue Cross and Blue Shield of Illinois. The network was a real strength: through the BlueCard program, BCBSIL members can use contracting doctors and hospitals across the country, which mattered for the three remote employees. The price was the problem. By our estimate the group’s premium went from about $2,600 a month in 2022 to about $5,200 in 2025. Then the 2026 renewal offer added another 28 percent.

None of this was caused by the employees’ health. Everyone on the plan was healthy, with no chronic or serious conditions. ACA small-group plans are community rated, which means the carrier prices your group using the costs of its whole small-group pool, adjusted only for things like age and location. A healthy group pays for the market’s claims, not its own. Nationally, small-group insurers asked for a median increase of 14 percent for 2027, so a five-person group can easily see much more.

What is a level-funded health plan, in plain terms?

A level-funded plan charges a fixed monthly payment, like regular insurance, but part of that payment is held for your own group’s claims, and unused money can come back to you. Here are the terms employers ask about most.

• Fully insured: you pay a premium, the insurance company pays all claims, and anything left over stays with the insurer.
• ACA small-group plan: a fully insured plan for employers with 1 to 50 employees. No health questions, community rated, and it must cover the ACA’s essential health benefits.
• Level-funded plan: a self-funded plan with stop-loss insurance built in, billed as one level monthly payment. KFF’s 2026 survey found 38 percent of covered workers at small firms are now in one.
• Claims fund: the part of each payment set aside to pay your employees’ medical and pharmacy claims.
• Stop-loss insurance: coverage that pays when one person’s claims pass a set amount (specific stop-loss) or the whole group’s claims pass the expected total (aggregate stop-loss).
• Surplus refund: a share of the claims fund the group did not use, returned after the plan year closes. It is available only where state law allows.
• Underwriting: the carrier reviews a short health questionnaire from each employee before offering a rate, and it can decline a group.

Why did UnitedHealthcare’s level-funded Choice Plus plan fit a team spread across four states?

It kept a national PPO network and priced the group on its own health. UnitedHealthcare’s level-funded plans can be built on the Choice Plus PPO network, which reaches across the country, so the employees in Kansas, Washington and California kept in-network access close to home. Nobody had to move to a regional HMO, and the Illinois employees stayed on the same plan as everyone else.

Because a level-funded plan is underwritten, each employee completed a short health questionnaire. A healthy group like this one tends to price well, because the rate reflects its own expected claims rather than the whole market’s. We also priced an ICHRA, which would have given each person an allowance to buy an individual plan in their own state. The owner preferred one group PPO with one set of benefits for everyone. If you are weighing those two paths, our guide to ICHRA vs QSEHRA explains how the allowance options work.

How much did the company save?

About half. Against the 2026 renewal offer, the estimated monthly cost fell from $6,650 to $3,325, a saving of about $39,900 for the year before any refund. Compared with what the company actually paid in 2025, the new plan still costs about $1,875 a month less.

Where that $3,325 goes matters, because only one part of it can come back. Most of the payment is the claims fund. The rest buys stop-loss insurance and pays for claims processing, network access and taxes.

How does the year-end surplus refund work, and what could it be worth?

The refund is the contract’s share of whatever is left in the claims fund after the plan year ends. The carrier waits a few months for late claims to arrive, settles the year and then returns the group’s share where state law allows it. The exact share and timing are written in the contract, so ask for both before you sign. UnitedHealthcare also sends monthly reports that show how the claims fund is running.

Here is how this group’s year could play out. The surplus column is the unused claims fund; the refund is the contract’s share of that number.

Even in the rough year, the company pays $39,900, about half the $79,800 the renewal offer would have cost. If employees pay part of the premium, ask your CPA and your benefits advisor how a refund should be used before you spend it.

When is a level-funded plan the wrong move?

When your group has significant health conditions, a level-funded plan usually prices higher than ACA coverage, or the carrier declines it. That is the tradeoff for being priced on your own health. Three more cautions apply.

• Renewals follow your claims. A cancer diagnosis or a premature baby in year one can raise year two’s rate sharply.
• Benefits can differ. Level-funded plans are not required to include every ACA essential health benefit, so read the summary of benefits side by side with your current plan.
• You can go back. ACA small-group carriers must accept your group, and from November 15 to December 15 they waive participation and contribution rules for a January 1 start date.

For a closer look at how these plans are priced and renewed, see how level-funded health plans work in 2027, and compare every path for a team your size on our Illinois small business health insurance page.