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
Frequently Asked Questions: Level-Funded Plans in California
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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.
Level-Funded Health Insurance 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.