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Should Your Organization Consider a Health Insurance Captive?

Health insurance captives give companies the opportunity to reduce costs, receive returns of underwriting profits and enjoy the benefits of being self-insured without as much risk.

What is a health insurance captive? A captive is an independent insurance company created and owned by at least one non-insurance company to assume the employee benefits risks of the captive owner (or owners). Incorporating a captive into a plan strategy allows members to benefit from being owners in an insurance company. Not only do captives provide market leverage, but members are able to increase the predictability of medical costs. For more information about captives, check out our Alternate Funding: Captives article.

For most organizations, cost containment is top of mind when tackling benefit planning. Alternative funding options like the captive model provide several advantages that traditional designs may not offer. Here are 3 ways health insurance captives offer more value:

  1. More Control of Medical Costs

    Employers want the ability to budget medical spend the way they manage most other expenses. With change being the only constant in the health insurance environment, captives provide a strategy for employers to take better control of their healthcare costs.

  2. Receive Returns of Underwriting Profits

    Companies participating in a captive program have the opportunity to benefit from the underwriting profits. With a captive plan, your positive claims experience is rewarded. Conversely, a standard employer reinsurance contract requires premiums paid in and all risk and reward is shifted to the insurance company with no potential upside to the employer.

    The opportunity to receive the underwriting profits can motivate employers to develop strategies that encourage improved health of participants and proactively manage risk.

    Captive owners typically understand that they are, on some level, able to impact the cost of healthcare and often conclude that wellness plans can be an effective method of positively impacting spend.

  3. More Protection Than Fully Self-Funded Plans

    Medical costs are too high to make completely self-funded plans a good option for many employers. To minimize risk, many employers choose a partially self-funded health plan which involves adding a reinsurer or stop-loss carrier. The captive provides an extra layer between the self-insured employer and the stop-loss carrier. In a health insurance captive, the high-cost claim risk is spread over all member companies.

A captive health insurance solution is one of many alternative funding options for your organization. Reach out to your OneDigital representative to find out how a captive health insurance model might impact your benefits strategy and help choosing the right solution for your company.


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  1. I think it's cool how health insurance captives are a great way for businesses to manage their healthcare costs. I imagine that healthcare isn't cheap for a business. Being able to completely control their spending in healthcare as they do with all other finances would be extremely beneficial for them.

  2. Captive insurance is a form of self-insurance where a group of entities to join together and form their own insurance pool. That means members share risk, and in doing so they create greater purchasing power, cost consistency, and long-term risk management. For example, a small business of 10 employees might be able to experience the buying power of a much larger group due to the size of the captive. Captives allow its members to essentially “own” their insurance. So instead of paying premiums to an insurance company (which in turn becomes profit for the insurance company), the group contributes to a shared dividend pool. That money is then rewarded back to members when there’s good performance. All the while the overall captive is still protected against large claims by an overlying insurance policy.

  3. I liked that you said that one thing to consider is purchasing healthcare insurance. I would imagine that having healthcare insurance would ensure that you would be able to receive the treatment that you would need if you became ill. I would be sure to purchase healthcare insurance so that medical bills wouldn't be so expensive and I could go to the doctor.

  4. I like the idea of getting health insurance from an employer. It is super beneficial for both the employer and employee. The employee gets health insurance, and the employer is able to budget what the expenses are for. I think it is important to have a good budget where you know what goes where.

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