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Should Your Organization Consider a Health Insurance Captive?

Health insurance captives offer companies a strategic way to manage healthcare costs, gain returns on underwriting profits, and enjoy the benefits of self-insurance with reduced risk.

  • What is a health insurance captive?

    A health insurance captive is an independent insurance entity created and owned by one or more non-insurance companies to cover the employee benefits risks of the captive's owners. By incorporating a captive into their benefits strategy, companies can leverage the advantages of being part-owners of an insurance company. This setup not only provides market leverage but also enhances the predictability of medical costs for the members. Not specific to all captives, but the ones we work with, the Captive is owned by like-minded business owners who share industry insights and best practices across the country to influence strategic direction and decisions. This allows for a much more proactive strategy to managing healthcare spend.

  • Benefits of Health Insurance Captives

    1. More Control of Medical Costs

      Employers often seek to budget their medical expenses similarly to other business costs. Given the ever-changing landscape of health insurance, captives offer a way for employers to take greater control over their healthcare expenditures.

    2. In an environment of rising pharmacy costs and increased health risks on the plan, this control can lead to more predictable and manageable costs.

    3. Receive Returns of Underwriting Profits

      Participating in a captive program allows companies to benefit from underwriting profits. Unlike standard reinsurance contracts where premiums are paid to an insurance company with no potential upside for the employer, captive plans reward positive claims experiences. This potential for profit can incentivize employers to implement strategies (health management, RX, oncology, transplants, gaps-in-care mitigation etc.) that promote the health of participants and proactively manage risks.

    4. More Protection Than Fully Self-Funded Plans

      For many employers, the high costs associated with fully self-funded plans are prohibitive. Employers recognize they need to understand all of the options and begin the think differently about their approach to healthcare spend. Captives provide an additional layer of protection by spreading high-cost claim risks across all member companies. This structure minimizes the financial impact of large claims, making it a safer option than being fully self-insured.

    5. Conclusion

      Health insurance captives present a compelling alternative to traditional health insurance models by offering greater control, potential financial returns, more progressive strategic direction and enhanced protection. For organizations focused on cost containment and proactive health management, captives can be a valuable component of their benefits strategy.

      For more detailed information on captives and other cost containment strategies, consider exploring resources such as OneDigital's Cost Containment Playbook. OneDigital's Cost Containment Playbook.

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