Fully Insured vs Level-Funded Group Health Insurance
Fully insured plans are the traditional model: your employer pays a fixed monthly premium to the insurance carrier, which assumes all insurance risk. Level-funded plans (also called partially self-funded or partially self-insured) have the employer fund a monthly amount that is explicitly divided: a claims fund, a stop-loss premium, and administrative fees. If your group's actual claims come in below projections, you receive a refund of the unused claims fund at year end — typically 50–100% of the surplus.
Who Qualifies for Level Funding
Level-funded plans are available to groups as small as 5 employees in California, though most carriers require 10–15+ enrolled to participate. UHC All Savers, Aetna Funding Advantage, Cigna Level Funded, and Anthem Foundation are the major level-funded products in the California market. Groups with young, healthy demographics and no anticipated high-cost claimants are the strongest candidates — they're the most likely to generate year-end surplus refunds.
Potential Savings
Groups that switch from fully insured to level funded with healthy claims experience typically see: 8–15% lower monthly fixed costs compared to fully insured, plus year-end refunds in good years. On a 30-person group paying $15,000/month fully insured, level funding might run $13,000–$14,000/month, saving $12,000–$24,000 annually before refunds. In a good claims year, the refund might add another $10,000–$20,000 in savings.
Risks of Level Funding
Level-funded plans are not risk-free for employers. If your group has a bad claims year — one catastrophic diagnosis can cost $500,000+ — your claims fund is depleted and stop-loss kicks in. Stop-loss protection caps per-member liability at a specific amount (typically $20,000–$50,000 per person per year), but the employer still bears more risk than in a fully insured plan. Additionally, level-funded plan participants must complete health questionnaires, and the plan can be re-underwritten at renewal based on actual health data.