Executive Summary: The Geographic Concentration of Level Funded Growth: Where the Market Is Expanding and Where It Is Stalled
LFP-07.06 — The Geography of Level Funded#
Level funded adoption does not distribute uniformly across the country. It concentrates in states and metro areas where a self-reinforcing infrastructure of broker expertise, stop loss carrier appetite, and TPA presence has accumulated over years of market activity. The Peterson-KFF Health System Tracker reports that 44% of covered workers in small firms with 10 to 49 employees were enrolled in self-funded or level-funded plans in 2025. That aggregate figure obscures the geographic distribution: growth is concentrated in markets where the infrastructure conditions documented throughout this series are already in place.
Texas leads by volume. The state’s regulatory environment has been consistently favorable since ERISA’s preemption framework was established. Dallas-Fort Worth, Houston, and Austin broker communities developed level funded expertise through repeated placements over two decades. Stop loss carriers including Sun Life, Tokio Marine HCC, Symetra, and Voya built underwriting appetite in Texas through claims experience accumulated at scale. Ohio, Indiana, and Tennessee represent the Midwest pattern: favorable regulation, adequate metro-area network density, established broker communities, and marketplace competition present but insufficient to make ICHRA the obvious alternative. Florida’s pattern is distinct: favorable regulation and strong infrastructure, but 4.2 million Floridians enrolled in 2025 marketplace plans create active ICHRA competition that Indiana TPAs largely do not face.
The concentration reflects three compounding feedback loops. The broker expertise loop runs from placement experience to competency to market share: brokers with level funded knowledge recommend it and retain clients who adopt it; brokers without it default to fully insured. The stop loss carrier appetite loop runs from volume to claims data to underwriting confidence to competitive pricing back to volume: carriers underwrite aggressively where claims data is deep and apply geographic loading where it is thin. The TPA presence loop runs from deal flow to operational investment to service quality to retention: TPAs invest where the volume justifies it, producing competitive services in mature markets and secondary-territory support in thin ones.
Markets without established infrastructure face a cold-start problem that regulatory favorability alone cannot solve. Montana, Wyoming, the Dakotas, and much of rural New England permit level funded under their regulatory environments. They do not have broker communities trained in the product, stop loss carrier appetite for the geographic risk, or TPA infrastructure capable of administering plans for dispersed rural employers. The regulatory green light is present. The product is not.
Solving the cold-start problem requires deliberate, coordinated sequencing: competitive stop loss pricing to enable broker recommendations, broker education to convert employer inquiries, and TPA operational investment to deliver service quality that produces retention. Each investment requires the others before it pays back. That interdependence is why new market development is slower and more expensive than continued penetration of established markets — and why the geographic concentration of level funded growth reflects infrastructure investment decisions made years earlier rather than current employer demand.