Captive Insurance vs. Self-Insurance

Captive Insurance vs. Self-Insurance_Roundstone Insurance


  • Group captive insurance is a type of self-insurance, with the added benefit of sharing risk with other participants.
  • 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



When it comes to buying health benefits, self-insurance is an alternative to fully-insured.


With a fully-insured model, you pay a fixed premium to a commercial insurance company. With self-insurance, also known as self-funded insurance, you only pay for what you use and keep the rest. Self-insurance generally offers more control and personalization than a fully-insured approach.


With “pure” self-insurance, the employer is on their own. However, you can also self-insure with a group captive, which bands together other like-sized companies into a large pool, so you benefit from a risk-sharing approach. The pool gives you the power and scale of a much bigger company — and in the world of insurance, it’s all about the law of large numbers. A group captive makes self-funded insurance a viable, affordable, and safe option for small to midsize companies to save on benefits.


If you find yourself challenged by steadily increasing insurance premiums or a lack of transparency from your insurance company, self-funded health insurance can be the change of pace you’re looking for. Deciding exactly HOW to self-insure depends on the amount of risk you’re able to accept.



What Is the Difference Between Self-Insurance and Captive Insurance?


Self-funded health insurance involves creating a bank account specifically to fund employee healthcare claims. To protect against high-cost, catastrophic claims, the self-insured company will typically purchase stop-loss insurance for coverage.


Many corporations are self-insured because they can reduce the administrative costs that come with being fully insured and they can have more control and flexibility over their plan design. It’s not a new idea. Today, 82% of covered employees who work for the nation’s largest companies have insurance plans that are wholly or partially self-funded by their company, according to the Kaiser Family Foundation. However, pure self-funded health insurance comes with accepting more risk, which is why this option traditionally was only accessible to big companies with plenty of funding available.


Captive insurance falls within the umbrella of self-funding, but it allows you to take, share, and shift risk at levels that you decide with the help of the expertise of your benefits advisor. With a group captive, self-funded health insurance plans enable employers to band together and share risk, making self-insurance an attractive option for small and mid-size companies who do not have the scale to self-fund on their own. Self-funding through a group captive also offers a lot more plan flexibility and control, which, in turn, can help companies realize significant cost savings.


Stop-loss coverage is a critical component of a self-funded health insurance plan. The stop-loss policy covers claims above the plan’s retained claims. The claims fund of a self-funded employer will pay claims up to the predetermined deductible for each of the company’s covered employees. The role of the stop-loss is to cover all claims above these deductible levels. When stop-loss coverage is added to a group captive plan, it spreads the risk of catastrophic claims over all members of the captive, decreasing volatility and costs for all. Through Roundstone’s Group Medical Captive, small to midsize companies can self-insure with the confidence of the Fortune 500s.


At the end of the year, unused premium funds retained by the captive are returned to employers on a pro rata basis. This motivates each employer to do their part to reduce costs through cost containment partners and solutions, while allowing them to share in profits that would otherwise be kept by big insurance carriers.


Ultimately, self-insuring under a group captive gives you more control over your costs. Your premiums are regulated by your company’s unique health needs, not statistics. Plus, you have the ability to earn money back by using techniques to reduce your risk.



Which Self-Funding Approach Is Right for You?


While pure self-insurance and self-funded health insurance through a group captive both help your business save money compared to paying insurance premiums, group captive models are generally safer and perfectly designed for the budget, risk-tolerance, and benefits needs of the small and midsize business.


If you’re looking to control your costs, gain more of a say in your insurance coverage, and limit your risk, self-funded group captive insurance can be an excellent option.



Contact Roundstone Insurance to Learn About Our Self-Insured Solution


Roundstone originated the self-funded group medical captive as a safe and efficient model for self-funding health insurance in 2005. We now have more than 700 clients and 120,000 lives covered – and are growing fast. With a new and innovative approach to self-funded insurance that prioritizes alignment of interests, we’re on a mission to transform healthcare by always advocating for the interests of the employer. We align with benefits advisors and other solution providers who are similarly focused.


Contact our team to get a quote on self-funded insurance to compare your options today.




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