California Employer Resource · Plan Structure
🏥 Fully Insured, Level-Funded, or Self-Funded — Which Fits Your Group?
These three words describe who’s actually on the hook for your employees’ medical claims — and that changes your risk, your potential savings, and what’s realistically available at your company’s size.
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Looking for the full employer rulebook — the 50-employee mandate, penalties, and tax credits? See the full guide →
🤝 What do fully insured, level-funded, and self-funded actually mean?Funding Models
They’re three different answers to “who pays the claims?” Fully insured: you pay a fixed monthly premium to a carrier, and the carrier bears all the risk — if claims run high, that’s the carrier’s problem, not yours, at least until renewal. Self-funded: your business pays claims directly out of its own funds (usually through a third-party administrator who processes everything), so you keep the savings in a good year but absorb the full hit in a bad one. Level-funded sits in between: you pay a fixed monthly amount that’s split into a claims fund, stop-loss insurance, and admin fees — you get a refund if claims come in under budget, and the stop-loss policy caps your downside if they don’t.Source: Gusto — Fully-Insured vs. Self-Insured vs. Level-Funded Health Plans
📊 What size business actually qualifies for level-funded or self-funded?Group Size
Fully insured is available at every size, from a 2-person group up. Level-funded is most commonly offered to groups in roughly the 10–100 employee range — carriers want enough employees to spread risk and a reasonably healthy, stable workforce; it’s generally not a fit for very small or very high-risk groups. Self-funded is typically reserved for larger employers (often 25–50+ employees with strong, predictable cash flow), since your business is directly exposed to claims volatility. See how California defines small vs. large group →Minimum group sizes for level-funded and self-funded arrangements are set by the carrier or TPA, not by California law, and vary by company.
💵 Why would a small group choose level-funded over just staying fully insured?Why Switch
Three main reasons: you get a refund if your group’s actual claims come in below what was budgeted (with fully insured, the carrier just keeps that margin), you get more flexibility to customize plan design than a standard off-the-shelf small-group menu, and your business still has a stop-loss safety net so one catastrophic claim doesn’t blow up your budget. The tradeoff is that your monthly cost can be somewhat less predictable than a locked-in fully-insured premium, and it generally works best for a workforce that’s healthy and stable rather than high-turnover or high-risk.
⚖️ Is level-funded available to every small group in California right now?Availability
Generally yes — California doesn’t currently have a state-specific law banning or capping level-funded small-group plans the way a small number of other states have begun to regulate stop-loss attachment points. That said, this is an area regulators nationally are actively watching, since level-funded arrangements pull healthier groups out of the traditional fully-insured small-group risk pool. Availability, minimum stop-loss attachment points, and carrier appetite can and do shift from renewal to renewal, so this isn’t a “set it and forget it” decision — it’s worth re-checking at every renewal rather than assuming last year’s terms still apply.Regulatory treatment of level-funded and stop-loss arrangements is an evolving, state-by-state area outside California, and insurance-department positions can change. Confirm current availability and terms with your broker or carrier each renewal cycle.
🥊 Do You Really Need a PEO?
👨⚕️ “Thinking about a PEO? Many lock you into one benefit structure, with admin fees built in.”
👩⚕️ “Here you get the HR tech, the compliance support, the Professional Suite at no additional cost, and full freedom to choose across the open market. What made a PEO sound appealing in the first place?”
🔍 Compare Before You Commit: Keep Your Freedom of Choice