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Captive Insurance vs. Self-Insurance

Professionals comparing captive insurance vs self insurance benefits

Highlights

  • Group captive insurance is a type of self-insurance that allows participants to share risk with other members.
  • Opting for a group captive can make self-funded insurance more accessible to a small or midsize company.
  • Both options can give you more control over healthcare costs.
  • Roundstone enables employers to buy benefits like a Fortune 500 by self-insuring through its innovative and proven group medical captive.

 


Imagine having the power to take control of your healthcare spending, design a plan that fits your companyโ€™s unique needs, and even get a refund at the end of the yearโ€”all without sacrificing the quality of your employee benefits.

 

It may sound too good to be true, but with the right approach to self-funding, you can make it happen.

 

The distinction of captive insurance vs. self-insurance is a fine one โ€” captive insurance is a type of self-insurance, an alternative to traditional fully paid insurance and a way to save money on employee health benefits.

 

Cost Containment in Healthcare: Captive Insurance vs. Self-Insurance

In 2023, 83% of covered workers1 in large companies were covered by self-funded plans but only 18% in smaller companies.

 

The reason for that difference is simple. Until recently, only large corporations had the resources to self-fund employee health insurance. But thatโ€™s changing.

 

Hereโ€™s why: When exploring options beyond traditional fully insured employee health plans, two primary self-funding models emerge: self-insurance and group captive insurance.

 

The chart below shows the factors that set them apart.

 

Feature Self-Insurance Self-Funding with Captive Insurance
Funding Approach Employers fund healthcare costs directly through a dedicated bank account. Combines self-funding with shared risk by pooling resources with other businesses.
Ideal For Large companies with substantial financial reserves and ability to absorb high-cost risks. Small and midsize companies seeking cost predictability and stability.
Risk Management Employers typically purchase stop-loss insurance to protect against catastrophic claims. Includes distributed stop-loss coverage to minimize volatility and financial exposure across all member companies.
Cost Predictability and Stability Costs can vary significantly based on claims incurred, leading to potential financial volatility. Shared risk and stop-loss coverage provide more predictable and stable costs for businesses of varying sizes.

 

Self-insurance requires businesses to independently fund healthcare costs, making it most suitable for large companies with high risk tolerance and financial reserves.

 

Self-funding with captive insurance pools resources among businesses to share risk, providing cost stability, transparency, and stop-loss protection for small to midsize companies.

 

With a captive self-funded model, small to midsize companies can now self-insure with the confidence of the Fortune 500s.

 

is-captive-insurance-right-for-you

 

The Advantages of Captive Insurance for Small Businesses

Why do more small and midsize businesses prefer group captives over pure self-insurance?

 

Captive insurance delivers:

 

  • Risk sharing. Share risks with like-sized companies, reducing the financial impact of large claims.
  • Cost savings. Access economies of scale, resulting in lower overall costs.
  • Flexibility and control. Design healthcare plans tailored to specific needs, including wellness incentives and preferred provider networks.
  • Transparency. Direct access to claims data enables informed decision-making and healthcare cost-containment strategies.
  • Return on unused premiums. Members receive refunds of unused funds in the captive pool in the form of annual distributions, unlike traditional fully insured plans.

 

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Partnering With Roundstone

Roundstone goes beyond offering innovative insurance models. As the pioneer of the group medical captive model, weโ€™ve delivered unmatched value through a transparent, client-focused approach to health insurance since 2005.

 

With in-house underwriting, exceptional support teams, and strategic cost-containment measures, Roundstone ensures your business has the tools to achieve sustainable cost control and enhance employee well-beingโ€‹โ€‹.

 

By empowering businesses with tools like the CSI Dashboard and cost containment partners, we guarantee your company will save money while maintaining top-tier benefits for your employees.

 

Ready To Take Control of Your Healthcare Expenses?

Contact Roundstone today to discover how a group captive can provide predictable costs, exceptional employee benefits, and real savings for your business.

 

100 of our customers save money on insurance

 

1Source: WISG, 2023 Employer Health Benefits Annual Survey from Kaiser Family Foundation (KFF), WISG.

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