Captive Health Insurance

Group Medical Captives: An Overview

​With medical costs rising more each year employers are always under pressure to find unique ways to reduce their group health insurance expenses.  Self-funding and captive insurance programs have become a popular method of lowering costs. In the United States, over 60% of employees have their healthcare claims covered by self-funded medical insurance plans and the number of businesses transitioning from fully-insured to self-funded insurance policies is increasing daily.  Self-funded employers can save even more money by participating in a captive insurance program.

What is a Group Medical Captive?

Some employers use self-funding insurance as coverage for the costs of their employees’ healthcare.  A good option to consider in conjunction with a self-funded health insurance plan is a group medical captive, sometimes referred to as a stop-loss captive.

A captive medical insurance policy is not considered insurance in a traditional sense like a fully-insured policy typically offered by well-known insurance carriers such as Blue Cross and Blue Shield.   Instead, it is a financing strategy that for self-insured employers that need protection against unpredictable healthcare claims.

The catastrophic stop-loss coverage provided by captive insurance companies is an alternative to more commonly purchased self-funded plans because they are using the law of large numbers to reduce employer claims exposure.  Captive insurance companies often come with more costs but less risk.  However, on the other hand, self-funded insurance outside of a captive insurance company might be less costly, but with more risks.

How Does a Medical Captive Work?

In a group medical captive several like-minded self-funded employers combine their resources to purchase stop-loss insurance to cover large claims. Each of these employers will keep their own self-funded health plans that are separate from the other members of the medical captive. Medical captives allow all the participating employers to customize their policy benefits, plan rules, and other features like copays and deductibles.  They can even choose their own third-party administrators and provider networks. For example, consider the following companies all pooling their self-funded health plans into one captive insurance company.  Notice that each company has different policy features, the they are all part of a captive health insurance program:
  • Employer A, located in Logan, Utah has 110 employees has a $2,500 calendar year deductible using the Wise PPO network. They purchase Sterling Urgent Care memberships for their employees.
  • Employer B, located in Idaho Falls, Idaho has 30 employees and a $6,500 calendar year deductible and uses the Cigna PPO network. They purchase Sterling Urgent Care memberships for their employees.
  • Employer C, located in Hailey, Idaho has 65 employees, with a $3,000 calendar year deductible and uses referenced based pricing.  They purchase Sterling Urgent Care memberships for their employees.
Each of these three companies have distinctly different medical insurance plans, but they all have two things in common: First, they all understand how the Sterling Urgent Care membership program will reduce their health insurance claims and choose to purchase memberships for their employees; and second, they each need to buy stop-loss insurance. Together they can achieve more by combining their purchasing power regardless of whether their company is in Idaho, Utah, or Wyoming.

Get More Information on Group Medical Captives

If you are a business owner, you should consider all the available financing options for your company’s employee benefits from fully-insured and level-funded policies to self-funded and captive insurance.  Fully-insured policies work well for those companies who want a traditional approach to employer-funded healthcare. 
Employers created captive insurance companies for the added advantages to self-funded employers. Group medical captives enable employers to pay for lessor claims themselves and have a large insurance company cover catastrophic claims.  You might like the idea of group medical captives if your goal is to improve transparency and control. 


More Information

For more information regarding group medical captives and how they can benefit your company, contact Sterling Insurance Agency.

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