Moving right, you take on more claims risk. In exchange you see more of your data and keep more of what you don't spend.
A group health captive is a self-funded structure in which multiple employers pool a layer of risk together, spreading the impact of large claims across the group.
How it works
Each employer in the captive runs its own self-funded plan and pays its own expected claims. Above that, there's a layer of risk the members share. Above that again, stop-loss insurance covers the largest claims.
The shared layer is the point. A single large claim that would hurt a mid-sized company on its own is absorbed partly by the pool.
When it tends to make sense
Captives often suit mid-sized employers who want the control and reporting of self-funding but aren't comfortable carrying all of the risk alone. They can also be a step for a level-funded group that wants more flexibility in plan design and vendors.
The tradeoffs
You take on more risk than with a fully insured or level-funded plan, and your costs will move from year to year. You're also tied, to a degree, to how the other members perform.
In return you get detailed claims data, more say over plan design, and the chance to keep money you didn't spend.
What we evaluate
Captive programs vary a lot. Before we recommend one, we work through the terms with you.
Entry requirements and how members are selected
Collateral or deposits required up front
Stop-loss terms and the size of the shared layer
Which administrators, networks and pharmacy vendors you can use
How long you're committed and what leaving involves
What changes from one approach to the next
Factor
Fully insured
Level funded
Captive
Self-funded
Who pays claims
The carrier
A claims fund inside your monthly payment
You, up to a set level, then the shared pool
You, up to your stop-loss limits
Monthly cost
Fixed premium
Fixed monthly amount
Fixed fees plus claims that vary
Fixed fees plus claims that vary
Claims reporting
Very little
Monthly reports
Detailed
The most detail
After a low-claims year
The carrier keeps the difference
A surplus may come back to you
You keep unused funds, and the pool may return some
You keep what you didn't spend
Plan design flexibility
Carrier plan menus
Some flexibility
Considerable
The most
General comparison. Actual terms depend on the carrier, the program and your group.
Common questions
What is the difference between fully insured and level funded?
With a fully insured plan, the carrier takes on all claims risk for a fixed premium. A level-funded plan also has a fixed monthly cost, but it is built on your group's actual claims, gives you more reporting, and may return a surplus if claims come in lower than expected.
How many employees do you need to self-fund?
PAKG generally starts evaluating self-funding for employers with 50 or more enrolled employees. Group health, cash flow and risk tolerance matter as much as headcount.
Is a captive the same as self-funding?
Each member is self-funded, but members share a layer of risk with one another. A standalone self-funded employer carries that layer alone.
