Texas Level-Funded vs Fully Insured:
Actuarial Analysis
Compare level-funded and fully insured health plan costs for your Texas business. See potential savings, surplus refunds, and worst-case scenarios -- powered by Texas-specific carrier data and actuarial benchmarks.
Texas Level-Funded Market at a Glance
Level-Funded Health Insurance in Texas: What Employers Need to Know
Texas is the largest level-funded market in the country by employer count, driven by the state's massive economy, minimal regulation, and strong carrier competition. The cost index of 0.92 reflects below-average costs, and the absence of state income tax and minimal benefit mandates create a streamlined business environment. Texas employers have more level-funded carrier choices than employers in virtually any other state.
The Dallas-Fort Worth, Houston, Austin, and San Antonio metro areas all have exceptional carrier competition, with both established national carriers and innovative startups like Sana Benefits and Gravie actively competing for level-funded business. UnitedHealthcare and Cigna have the largest level-funded market share in Texas, but Aetna, Humana, and Oscar also compete vigorously. The minimum group size for level-funded plans in Texas is just 2 employees with most carriers.
Texas has not expanded Medicaid, which affects individual market dynamics but has minimal impact on employer-sponsored level-funded plans. The state's Department of Insurance treats level-funded plans as self-funded under ERISA and has not imposed additional regulatory barriers. Texas employers benefit from competitive stop-loss pricing (about 5% below national averages), generous surplus return provisions (50-80% of unused claims funds), and the state's pro-business regulatory stance.
Frequently Asked Questions: Level-Funded Plans in Texas
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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 (0.92 for Texas) 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 Texas's stop-loss factor (0.95) 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: Texas's index of 0.92 adjusts base claims for state-level provider costs, utilization patterns, and regulatory environment. Based on CMS Geographic Practice Cost Index and Texas 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, Texas Department of Insurance filings.
Analyst Notes: Texas Level-Funded Market
Actuarial Context: Texas's cost index of 0.92 reflects the state's position relative to the national average for employer-sponsored health insurance. The level-funded discount potential of 14% is achievable for groups with favorable demographics, but actuarial credibility requires sufficient enrollment -- typically 2+ employees for most carriers in Texas. Groups below this threshold face wider confidence intervals in claims projections, which carriers compensate for through higher stop-loss premiums and reduced surplus return percentages.
Methodology Disclosure: This calculator uses a simplified actuarial model that applies age factors (CMS 3:1 curve), industry adjustments (SOA experience studies), and state-specific cost indices (CMS GPCI) to the user's inputs. The stop-loss pricing is based on reference rate schedules from major reinsurers, adjusted by Texas's stop-loss factor of 0.95. Actual carrier quotes will incorporate additional underwriting factors including census-level age/gender distribution, prior claims experience, SIC code, plan design details, and network selection.
Risk Assessment: The very competitive carrier market in Texas provides strong competitive dynamics for level-funded pricing. Highly competitive market with excellent renewal leverage. Employers should request quotes from at least 3-4 carriers to ensure competitive terms on admin fees, stop-loss pricing, and surplus return provisions.