Fixed vs. Variable Group Captive Health Insurance Costs

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  • Insurance carriers that offer fully insured plans bring in big profits with 100% fixed-rate structured health insurance.
  • Fixed costs with self-funded group captive insurance are only around 15%.
  • With self-funded group captive insurance, you are free to use cost-containment strategies to lower the remaining 85% of your expenses.
  • By using Roundstone’s cost containment solutions and tools such as the CSI Dashboard to examine your claims data, you can reduce variable spending in your self-insured healthcare plan and receive a distribution of unused premiums each year.



Self-funding with a group captive plan offers a more beneficial structure than traditional insurance when it comes to fixed versus variable health insurance costs. That’s because group captive health insurance is designed with only 15% in fixed costs, allowing you to have more control over how the remaining costs are spent.


Fixed vs. Variable Costs in the Fully Insured Model


There is no such thing as variable costs in a traditional fully insured model. Fully insured plans lock in every aspect of the plan at a fixed premium cost. Your premium covers everything from administration fees to network provider fees and prescription drug costs.


The fully insured model is sometimes called “the easy button” because you just pay a premium and that’s that. But under a fully insured plan, you don’t know exactly where those premiums are being used. Worse, you have no control over the coverage you receive. Even if you never use a benefit provided by a fully insured plan, you still need to pay the same premium as every other member.


This 100% fixed rate structure benefits the big insurance companies because it allows them to keep all their members’ unused premiums at the end of the year rather than returning them.


Fixed vs. Variable Costs With Group Captive Insurance


A self-insured group captive plan takes the opposite approach to fixed versus variable costs. Under self-funded group captive insurance, your costs are 15% fixed and 85% variable. This allows you to implement cost-saving measures throughout the year to better manage and optimize the savings of your self-funded health insurance plan.


Fixed Costs

Fixed costs in a self-insured group captive plan cover:

  • Reinsurance/stop-loss protection
  • Third-party administrator (TPA) fees
  • Consultant fees
  • Administrative costs


These fixed costs cover your required contribution to the self-funded group captive plan, such as the stop-loss premium, as well as your fees to the TPA for handling your administrative claims processing.


Variable Costs

In a self-funded group captive plan, your variable, or fluid, costs consist of your pool premium, collateral, and employer claims account.


As part of your self-insured group captive plan, you are responsible for covering up to $10,000 in claims per member. However, unlike a fully insured plan, you pay claims as they are incurred rather than a fixed monthly premium.


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How to Reduce Your Variable Costs


Your variable costs in your self-funded health plan are made up of a combination of plan factors, such as vendors, network providers, pharmacy benefits manager (PBM), prescription drug spending, and emergency room utilization. With a self-insured group captive plan from Roundstone, you can track each of these components using our CSI Dashboard.


The CSI Dashboard is an analytical tool that allows you to compare your costs with industry benchmarks so you can see where you are over- or under-covered. From there, you can team up with our CSI team to discover cost-containment strategies that reduce your variable costs and improve the savings of your self-funded healthcare plan.


Vendors and Network Providers

With Roundstone’s self-insured solution, you can choose vendors and network providers that provide the best care at affordable prices to reduce your variable costs. Opt for low-cost, high-quality hospitals and Centers of Excellence that aren’t available under traditional plans. Work with the CSI team to discover vendors that offer discounts on supplies and treatments that affect your members, such as diabetes supplies or dialysis programs.


Pharmacy Benefits Manager

Switching to a transparent PBM offers significant savings on your variable costs in a self-funded health insurance plan. PBMs who work for traditional insurance carriers do not pass their savings onto plan members. Instead, they often charge high administrative fees, and their mega-carrier employers keep the savings they negotiate.


A pass-through PBM passes the savings they receive onto you. These savings come in the form of pharmaceutical rebates, price negotiation, co-pay assistance programs, prescription delivery services, and access to specialty pharmacies.


Transparent PBMs also pass savings on to plan members along with a clear, predictable fee schedule so that you know exactly what administrative fees you are handing over.


Prescription Drug Spending

Along with partnering with a better PBM, you can analyze your prescription drug spending and implement cost-containment strategies to further reduce your variable costs in your self-funded health insurance plan.


With the CSI Dashboard, you gain an overview of where your prescription costs are going. This allows you to pinpoint specialty medications that are causing you to overspend. With this information, you can work with your advisor and the CSI team to find specialty rebate programs, mail-in programs, or generic alternatives for those high-dollar medications.


With Roundstone’s self-insured group captive plan, you also have the freedom to change your prescription coverage plan to cover drugs your employees need while not paying extra for high-cost drugs they don’t use.


Emergency Room Visits

Emergency room visits can make up a significant portion of your health plan’s expenses. At an average cost of $1,010 per visit, recurring emergency room use can easily add up to tens of thousands of dollars per year.


To reduce ER expenses, use your claims data from the CSI Dashboard to anonymously identify the conditions causing your employees to visit the ER. With this HIPAA-compliant information, you can implement health management programs or prioritize primary care, both of which cost much less than ER visits and provide better, more personalized care for your employees.


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Effect of Reduced Variable Costs on Your Total Expenses in a Self-Funded Health Plan


The best part about reducing your variable costs with a self-funded group captive plan is the savings. In a traditional insurance model, the carrier keeps your fixed premiums — no matter what you’re actually spending during the year.


With self-funded group captive insurance, you keep your unused premiums. With Roundstone’s self-insured solution, 100% of our group captive customers save money each year, and two-thirds save enough on their variable costs over four years to cover their fifth year’s claims.


Lower Your Health Insurance Costs With Self-Funded Group Captive Insurance From Roundstone


For businesses searching for alternative small business health insurance plans, self-funded group captive insurance from Roundstone provides numerous advantages over fully insured plans. With 15% fixed and 85% variable costs, you can take back control of your health insurance expenses and save.


Download our guide that the fully insured carriers don’t want you to see and discover how you can save thousands every year with self-funded group captive health insurance from Roundstone.


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