How much can California employers save with level-funded vs fully insured?

Based on California's average fully insured PEPM of $730 and typical level-funded discounts, employers can expect to save approximately 10% on a level-funded plan in the expected claims scenario. Best-case savings with surplus refunds can reach 20-30%. The California cost index of 1.05 affects both fully insured and level-funded pricing.

What is the stop-loss cost for level-funded plans in California?

Stop-loss costs in California are indexed at 1.08 relative to the national average. For a $50,000 individual specific attachment point, expect approximately $155 x 1.08 = $167 PEPM before age and industry adjustments. Lower attachment points ($25K-$40K) provide more protection but cost more.

What are the risks of level-funded plans in California?

The primary risk is that actual claims exceed the claims fund, requiring the employer to cover the shortfall up to the aggregate stop-loss corridor (typically 125% of expected). However, specific stop-loss caps individual catastrophic claims, and aggregate stop-loss caps total group exposure. In California, the very competitive carrier market provides competitive market with many carrier options.

What carriers offer level-funded plans in California?

Level-funded carriers in California include UnitedHealthcare Level-Funded, Cigna+Oscar Level-Funded, Anthem Level-Funded, Sana Benefits. Fully insured carriers for comparison include Kaiser Permanente, Blue Shield of CA, Anthem Blue Cross, Health Net, UnitedHealthcare. California's level-funded market is classified as very competitive, with a minimum group size of 2 employees for most carriers.

California Level-Funded vs Fully Insured
Savings Calculator

Compare level-funded and fully insured health plan costs for your California business. See potential savings, surplus refunds, and worst-case scenarios -- powered by California-specific carrier data and actuarial benchmarks.

California Level-Funded Market at a Glance

Avg FI Premium PEPM

$730/mo

LF Savings Potential

10% avg

Cost vs National Avg

+5%

LF Market

Very Competitive

Min Group Size: 2 employees

Surplus Return: 50-75% of unused claims fund

LF Carriers: UnitedHealthcare Level-Funded, Cigna+Oscar Level-Funded, Anthem Level-Funded, Sana Benefits

Mandates: Extensive state mandates including infertility treatment, acupuncture, chiropractic, and mental health parity beyond ACA

Your Company

Tell us about your California business so we can model level-funded vs fully insured costs using California-specific rates and carrier data.

State ?California has a cost index of 1.05 relative to the national average (1.00). This affects claims fund calculations, stop-loss pricing, and overall level-funded plan costs.Source: KFF 2025 State Health Facts; CMS GPCI Data

Number of Employees ?Full-time employees eligible for health benefits. Level-funded plans in California are available for groups of 2+ employees. Groups of 10-250 are the sweet spot for level-funded savings.Source: KFF 2025 EHBS; UnitedHealthcare Level-Funded Underwriting Guidelines

Average Employee Age ?Average age of covered employees. Level-funded underwriting heavily weights age. Each year above 40 adds roughly 2-3% to expected claims. Younger groups get better rates and lower stop-loss premiums.Source: CMS Federal Age Curve; SOA Group Health Experience Study

Industry ?Industry affects claims experience and level-funded pricing. Healthcare and construction workers tend to have higher claims. Tech and professional services trend lower. Carriers use SIC/NAICS codes for underwriting.Source: SOA Group Health Experience Study; Mercer National Survey 2025

Coverage Tier Mix ?Distribution of employees across coverage tiers affects blended costs. National average: ~55% single, ~15% EE+spouse, ~30% family. Adjust to match your workforce.Source: KFF 2025 Employer Health Benefits Survey

% Employee Only

60%

% EE + Spouse

20%

% Family

20%

Current Plan & Level-Funded Model

Enter your current fully insured costs and configure the level-funded model parameters. We'll show a side-by-side comparison using California-specific data.

Current Monthly Premium PEPM ($) ?Per-employee-per-month blended premium (employer + employee share). California's average is ~$730/mo for single coverage. If you don't have current coverage, use the California average as a benchmark.Source: KFF 2025 Employer Health Benefits Survey; California DOI Rate Filings

Annual Renewal Increase ?Expected annual increase in fully insured premiums. California's average trend is 8.5%. Fully insured renewals average 7-12% nationally. Level-funded plans are less susceptible to renewal shock.Source: Mercer National Survey 2025; Segal Health Plan Cost Trend Survey

10%

Plan Tier ?ACA metal tiers determine actuarial value. Higher tiers mean richer benefits and higher premiums, but also higher expected claims in a level-funded model.Source: CMS Actuarial Value Calculator

Expected Claims Ratio ?Portion of premium going to medical claims. Fully insured carriers run 80-85% loss ratios (ACA MLR floor). Level-funded plans target 65-75% expected claims as a percentage of the fully insured equivalent premium.Source: ACA Medical Loss Ratio Rules; TrustMark/Voya Level-Funded Reference Data

70%

Stop-Loss Attachment Point ?Per-person annual deductible on stop-loss policy. Claims above this for any individual are covered by stop-loss. Lower attachment = more protection but higher premium. California's stop-loss factor is 1.08x national average.Source: NAIC Stop-Loss Model Act; Sun Life/Voya Stop-Loss Rate Manuals

Admin Fee Estimate ?TPA fees, network access, and plan management costs. Typically 12-18% of the fully insured equivalent premium. Includes claims adjudication, reporting, compliance, and customer service.Source: Mercer National Survey 2025; SPBA TPA Fee Benchmark Study

15%

Include Pharmacy Carve-Out? ?Carving out pharmacy to a separate PBM can reduce costs by 5-10% on the pharmacy component, which is typically 25-30% of total claims. Adds complexity but improves transparency.Source: Pharmacy Benefit Management Institute; PBMI 2024 Trends Report

What This Means For You

In plain English: Level-funded is a way to pay for your team's health coverage that sits between traditional fully insured plans and full self-funding. You pay a fixed monthly amount (just like fully insured), but that payment gets split into three buckets: one for expected medical claims, one for admin fees, and one for stop-loss protection (catastrophic claim coverage). If your team is healthier than expected, you get money back. If claims run high, the stop-loss kicks in and caps what you owe.

Why it matters in California: California employers pay an average of $730/month per employee for traditional fully insured coverage. Level-funded alternatives in California typically save around 10% -- that is real money, especially when you multiply it across your whole team for a full year. The very competitive carrier market means you have plenty of options to shop around.

Getting Started Checklist:

Gather your current fully insured renewal documents and census data
Run the numbers in this calculator with your actual group demographics
Request quotes from at least 3 level-funded carriers
Compare stop-loss terms, admin fees, and surplus return provisions
Ask about network options -- make sure your team's doctors are in-network
Review the worst-case scenario to make sure your business can handle it
Work with a licensed benefits advisor who knows the California market

Level-Funded Health Coverage in California: What Employers Need to Know

California presents a complex landscape for level-funded health plans. As the nation's largest small-group market, California has extensive state-specific mandates that add to plan costs. However, level-funded plans structured under ERISA may be exempt from many state mandates, creating a significant cost advantage. California's cost index of 1.05 is only slightly above the national average despite the state's high cost of living, partly because Kaiser Permanente's large presence creates downward pricing pressure.

The California level-funded market is very competitive, with Kaiser Permanente, Blue Shield, Anthem, and UnitedHealthcare all offering products. However, California has stricter regulations around stop-loss insurance than many states, including minimum attachment point requirements. Groups considering level-funded arrangements should work closely with a broker who understands California's specific regulatory requirements, including Cal-COBRA continuation requirements that may apply differently to self-funded versus fully insured plans.

California employers often see the biggest level-funded savings when they have younger employee demographics and are currently paying for mandated benefits they don't heavily use. The ERISA preemption can potentially save 5-12% on mandated benefit costs alone. However, employers should be aware that California's Department of Managed Health Care has increasingly scrutinized level-funded arrangements to ensure they are genuinely self-funded and not merely repackaged fully insured products.

Frequently Asked Questions: Level-Funded Plans in California

Is level-funded health coverage available in California? +

Yes. California employers have access to level-funded health plans from carriers including UnitedHealthcare Level-Funded, Cigna+Oscar Level-Funded, Anthem Level-Funded, Sana Benefits. The minimum group size is typically 2 employees. Level-funded plans in California are treated as self-funded under ERISA, providing flexibility in plan design and potential savings.

How much can California employers save with level-funded? +

Based on California's average fully insured PEPM of $730 and typical level-funded discounts of 10%, employers can expect meaningful savings in the expected claims scenario. Best-case savings with surplus refunds can reach 20-30%, while worst-case exposure is capped by stop-loss insurance.

What happens if claims are higher than expected? +

Stop-loss insurance protects against catastrophic claims. Individual specific stop-loss covers any single claimant above the attachment point (e.g., $50,000). Aggregate stop-loss caps total group claims at 125% of expected. Your maximum exposure is predetermined and contractually limited.

What if claims are lower than expected? +

This is where level-funded shines. If your group's claims are below the funded amount, you receive a surplus refund. In California, typical surplus return provisions are 50-75% of unused claims fund. With fully insured plans, the carrier keeps the difference.

Which California employers are the best fit for level-funded? +

Level-funded plans work best for California employers with 2-250 employees, younger-than-average workforces, and a desire for cost transparency. Industries with lower claims risk (technology, professional services, education) often see the best results. The California market is classified as very competitive for level-funded options.

Built on Real Data -- Not Guesswork

This calculator uses California-specific actuarial data, carrier rate filings, and published survey benchmarks.

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KFF Employer Survey

2025 benchmarks from 2,000+ employers on premiums, plan design, and funding type distribution

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SOA Claims Tables

Society of Actuaries group health experience studies for expected claims modeling by age and industry

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Stop-Loss Rate Data

Sun Life and Voya reference rate schedules for specific and aggregate stop-loss pricing by attachment point

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California DOI Filings

State-level rate filings, carrier market share data, and regulatory requirements from California's insurance department

Want a Custom Level-Funded Quote for California?

Get a side-by-side comparison with actual carrier quotes from UnitedHealthcare Level-Funded, Cigna+Oscar Level-Funded, Anthem Level-Funded, Sana Benefits -- reviewed by a benefits advisor who knows the California market.

Calculation Methodology

Fully Insured Cost: Current PEPM x number of employees x 12 months. Projected forward using the annual renewal increase rate.

Level-Funded Breakdown:
- Claims Fund: PEPM x claims ratio x state cost index (1.05 for California) x age factor x industry adjustment x plan tier multiplier. This is held in a claims account to pay medical expenses.
- Admin Fee: PEPM x admin percentage. Covers TPA fees, network access, compliance, and reporting.
- Stop-Loss Premium: Based on attachment point selected. Adjusted by California's stop-loss factor (1.08) and group demographics.
- Total Level-Funded: Claims Fund + Admin Fee + Stop-Loss Premium.

Scenario Modeling:
- Best Case: Actual claims at 55% of expected. Employer receives ~50% of surplus (unused claims fund) as a refund.
- Expected Case: Actual claims match the expected claims fund. Typical savings vs fully insured.
- Worst Case: Claims run 130% of expected, but stop-loss caps total exposure at 125% of expected claims fund.

State Cost Index: California's index of 1.05 adjusts base claims for state-level provider costs, utilization patterns, and regulatory environment. Based on CMS Geographic Practice Cost Index and California DOI rate filings.

Data Sources: SOA Group Health Experience Study, Mercer National Survey 2025, KFF 2025 Employer Health Benefits Survey, TrustMark/Voya level-funded reference data, Sun Life stop-loss rate manuals, NAIC stop-loss model regulations, CMS Federal Age Rating Curves, California Department of Insurance filings.

California Level-Funded vs Fully InsuredSavings Calculator