Everything you need to know about captive insurance

Captive insurance, also known as a “self-insured plan” is a type of insurance that allows for employers to have more control over their own insurance premiums.

Captive programs enable employers to combine employees claims experience with other like-minded businesses to control medical insurance costs. Unlike a traditional insurance plan, the goal of a captive is to reduce the risk of its member companies while providing flexible, high-quality insurance coverage.

Traditional insurance

With traditional insurance, risk is passed on from an organization to an insurance provider that charges a premium and requires a deductible. The insureds are responsible to pay premiums monthly in addition to co-payments, which are a fixed payment when visiting a doctor. if an employer offers the insurance, they may pay a portion of the premium.

Organizations that select traditional insurance may be confronted with annual risks of claim denial and steep rate hikes. Premiums can increase over time and must be paid whether a claim is filed or not.

Benefits of captive insurance

A captive insurance program consists of a group of companies that join together to create a fund, also known as a buying group. Since the owners are also the insureds in a captive plan, they have the ability to exert greater control to negotiate terms such as renewal cycles.

The recent COVID-19 pandemic drastically impacted the way many organizations were able to conduct business. Captive programs allow employers to manage their total cost of risk more efficiently and provide greater control over health care costs with more flexibility of benefit plan design.

Related: 5 myths about benefits stop-loss captives

Captive insurance enables business owners to take full advantage of pharmaceutical rebates and provide employers with quality at a better price. Most captive programs offer plans that are licensed and protected by the Department of Insurance, while guaranteeing employers are exempt from ACA surcharges and tax on insurance premiums.

Captive health insurance programs can play an essential role in helping business owners offer affordable benefits programs. Organizations from various industries have the ability to utilize captive health insurance programs to reduce health care costs, lower risk, and provide the financial flexibility and control as business owners continue to navigate through the tail end of the COVID-19 pandemic.

About the Author

Steve Rosenthal is one of the most widely recognized leaders in the employee benefits and human resource industry. Before becoming CEO of Triton Benefits and HR Solutions, Rosenthal was the CEO and pioneer of CheckPoint HR. Rosenthal previously served as Chairman of EPIX of what became under his leadership, one of the largest human resources outsourcing companies in the country.