Can 1099s Get Group Level Funding? Yes—in many cases, 1099 contractors can get group level funding, but it depends on how the carrier defines eligibility, how your workforce is structured, and how your business documents compensation and working relationships. The biggest mistake employers make is assuming the answer is always “no,” then never looking at carriers and plan designs that are built specifically for contractor-heavy businesses. The second biggest mistake is assuming the answer is always “yes,” then submitting an application that doesn’t match the carrier’s eligibility rules and participation requirements. The best outcome comes from matching your roster to the right carrier appetite and building a plan structure that is clean, defensible, and easy to administer.

On this page, Diversified Insurance Brokers explains the practical reality: some level-funded carriers will allow 1099 participation under defined conditions, while others will not. Eligibility may depend on whether contractors meet hours thresholds, whether they are long-term and stable, how the business documents the relationship, and how the plan is written to define “eligible class.” We also cover when owner/partner rules differ from contractor rules, what documentation carriers typically request, and how to support contractors without creating issues for underwriting or renewals.

What “Group Level Funding” Means in Plain Language

Group level funding is a group health plan structure that blends the predictability of a fixed monthly payment with many of the mechanics of self-funding. Each month the employer pays a set amount that typically includes administrative services, access to a provider network, stop-loss coverage, and a claims-funding component. Claims are paid from the plan’s claims funding, and stop-loss is designed to protect the employer from unusually large claims.

Employers like this structure because it can feel more controllable than traditional fully insured coverage. Some level-funded designs also include the possibility of a year-end surplus credit or refund if claims run below expected levels, depending on the plan’s terms. For a broader overview of how employer plans fit together and where level funding sits in the spectrum, see our group health insurance overview.

Employers also ask why level funding is even worth considering. In many cases, it’s because the employer wants more transparency and more leverage at renewal. A helpful companion resource is why group level funding can make sense when participation and stability are achievable.

So… Can 1099s Get Group Level Funding?

Yes—1099s can get group level funding, but the key phrase is “under the right carrier and plan rules.” Some carriers and third-party administrators are willing to treat certain contractor populations as an eligible class when the business can document that the contractors are stable, active, and meet the plan’s definition of eligibility (often tied to hours worked, duration of engagement, and ongoing relationship with the employer). In those cases, the plan is built to include contractors in a way that underwriting can price and administer consistently.

Other carriers will limit eligibility to W-2 employees only. That is why the “right answer” is not a universal rule. The right answer is a process: you confirm how your people are paid, how long they’ve been engaged, whether they meet full-time hours, how many will participate, and what the employer will contribute—then you match those realities to carriers that allow 1099 participation in level-funded structures.

This matters because level-funded underwriting is sensitive to the stability of the group. If a carrier allows contractors, it still typically expects the contractor class to be stable enough to price as a group. If the contractor population turns over constantly or participation is uncertain, a carrier that technically “allows 1099s” may still be a poor match. The goal is to pursue a plan that is not just issuable, but renewable.

When 1099 Participation Is Most Likely to Work

While specific rules differ, contractor participation tends to be most realistic when the contractors behave like a stable workforce from an underwriting standpoint. That does not mean you need to convert them to W-2 employees. It means the carrier wants to see predictability and documentation.

Common traits of contractor groups that are easier to place into level-funded designs include: long-term contractor relationships (not short assignments), consistent work schedules, contractors who meet an hours threshold similar to full-time, and a clear roster that the employer can document. Employers who can clearly define who is in the contractor class—rather than selecting individuals ad hoc—tend to have a smoother underwriting experience.

If your business is small and you are trying to understand how eligibility thresholds can affect options, it helps to start with size guidelines like minimum employees for group health insurance. Even when 1099s are allowed, the carrier still wants a plan that meets participation and contribution standards.

What Carriers Typically Require When 1099s Are Included

When a level-funded carrier allows contractors, the carrier generally needs the eligibility story to be clean and provable. The exact list varies, but the documentation process is usually more detailed than a simple two-line census.

First, carriers usually want a clear census that separates W-2 employees from 1099 contractors and defines the eligibility class for each. The goal is to prevent confusion about who is eligible and why. Second, carriers may request evidence that contractors meet eligibility requirements. That could include proof of engagement duration, expected hours, or a contractor agreement structure that supports the plan’s eligibility class definition.

Third, participation still matters. A carrier may be willing to allow contractors, but it will still require the eligible class (or combined classes) to meet participation standards after valid waivers. If the contractor population is optional and few enroll, that can weaken the group’s participation profile. Fourth, employer contribution rules still apply. A level-funded plan is still an employer-sponsored plan, and the employer typically must contribute a minimum amount toward eligible participants.

Finally, stop-loss design becomes more important when the population includes contractors because volatility can feel different in groups with varying stability. To understand why stop-loss is the foundation of level funding, review understanding stop-loss insurance in level-funded plans.

Owner/Partner Rules vs. Contractor Rules

Owners, partners, and spouses are often handled under separate eligibility rules. This can create confusion because an owner may be paid differently depending on entity structure, and contractors may also receive 1099 forms. The point is that a tax form is not the same thing as an underwriting class. Carriers define eligibility based on plan documents and the person’s relationship to the employer.

When we evaluate a contractor-heavy business, we map every person into the correct category, confirm how the carrier will treat that category, and then design the plan around that structure. That prevents the two most common problems: enrolling the wrong people or using a carrier that simply won’t accept your workforce type.

How to Compare Level-Funded Options When 1099s Are In the Mix

When contractors can be included, the comparison should focus on three areas: stability, total cost, and renewal risk. Stability is about whether the contractor class is predictable enough to meet participation and remain intact through the plan year. Total cost is about premium-equivalent monthly funding, employer contribution, and employee contributions. Renewal risk is about how the plan is likely to behave if claims spike or the population changes.

Employers also want to know whether a level-funded design can return unused claims dollars. That depends on plan terms, but it can be part of the reason employers explore this model. If you want a clearer explanation of how surplus language typically works in small groups, see can small groups get health insurance refunds.

Tax treatment can also influence net cost depending on entity type and how contributions are handled. A helpful overview to frame that discussion is level-funded health insurance tax benefits explained.

Practical Ways to Support 1099 Workers If Not Everyone Should Enroll

Even when a carrier allows contractors, it may not always be best to enroll every contractor. Some employers prefer to define eligibility narrowly to keep the plan stable. Others may have contractors who are truly short-term, and including them could increase administrative complexity. In those situations, employers can still support contractors through education and separate coverage pathways.

For contractors who need temporary coverage or are between enrollment windows, employers often reference short-term health insurance options as a bridge strategy where it is appropriate and available. Some employers also share educational guidance on timing and continuity, using resources like how short-term health insurance can bridge the gap between coverage, so contractors understand what “bridge” coverage is meant to do.

The key is to separate “supporting contractors” from “forcing contractors into a plan design that isn’t a match.” If a carrier will allow your contractor class and the group will be stable, including contractors can be a legitimate strategy. If your contractor population is temporary and volatile, supporting them through separate pathways may be cleaner.

Examples and Scenarios

Scenario 1 — Stable contractor class included. A business has six W-2 employees and eight long-term contractors who work consistent schedules. The carrier allows the defined contractor class, participation is strong, and the employer meets contribution minimums. Quotes are built around the combined eligible class, and stop-loss is structured conservatively to protect against volatility. The plan is issued with clean documentation and renews without eligibility disputes because the class definition is consistent.

Scenario 2 — Contractors allowed, but employer chooses a narrower eligibility class. A firm has a mix of long-term and short-term contractors. The carrier may allow contractors, but the employer chooses to include only the long-term contractor class to keep stability. Short-term contractors are supported through education and separate coverage pathways. The underwriting file remains clean because eligibility is tied to defined class rules rather than ad hoc decisions.

Scenario 3 — Contractor-heavy business needs carrier matching. A startup has two W-2 employees and twelve contractors. The business wants level funding but does not want to convert contractors. The solution is identifying carriers that allow a contractor class under a defined eligibility framework, then building quotes that meet participation and contribution requirements. The success of the strategy depends on matching the roster to carrier appetite rather than assuming universal rules.

Why Work With Diversified Insurance Brokers

Contractor-heavy groups require a broker who understands which carriers and plan designs can handle non-traditional workforce structures. We start by mapping your roster into defined eligibility classes, confirming which carriers allow 1099 participation, and then building a plan design that aligns with underwriting and renewal realities. We also help employers understand how stop-loss, participation rules, and documentation affect the plan—not just at issuance, but at renewal.

If you want a preview of the issues employers typically need to address early, review top questions employers ask about group health insurance. The right plan is the one you can issue cleanly, administer confidently, and renew without surprises.