Being self-funded holds a slew of advantages for employers. But a fear of too much risk can sometimes make it feel out of reach for small or midsize companies. When that’s the case, joining a captive can help with mitigating that risk. The extra layer of security you receive as a member of a captive helps in making self-funding more accessible. That’s one reason captives, along with other alternative arrangements, are growing so quickly in the market. Our over four decades in the industry has taught us a lot about them. It’s also afforded us the opportunity to partner with some of the biggest names in the captive space. Below is everything you need to know about how to reap the benefits of self-funding through a captive.
How does a captive work?
Captives allow like-minded companies to pool resources to cover self-funded costs, with fewer of the risks. We like to think of captives as an excellent option for smaller and mid-sized companies to embrace the benefits of self-funding. The member-based model is making self-funding more accessible for employers with fewer employees, concerned about risk tolerance.
Here are three key reasons to consider them:
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- As a member of a captive, employers can pool funds and mitigate risk on large, unexpected or catastrophic claims.
- Joining a captive is both a turn-key solution and a long-term strategy to lower volatility.
- Captives help you join forces with like-minded companies to stabilize and reach common, shared employer goals.
Joining one also helps employers balance fears of fluctuations in monthly spending and puts a buffer in place to build a cost-effective benefits strategy. In addition, it can be a way to procure stop loss with less volatility.
How do you know if a captive is right for you?
Any group interested in switching to a self-funded plan can be a great candidate for a captive arrangement. It’s often a good fit for smaller companies, with anywhere between 50 to 250 employees. A captive can also serve as an effective bridge to go from fully insured into self-funding. But it’s important to take steps to evaluate your captive partner.
For starters, the longer a captive has been active in the market, the better. This longevity and experience will ideally make them more effective. You should also get a good feel for how they approach plan design. Captive managers may have unique recommendations around products or point solutions and may even require certain ones, versus making them optional. These should be considered carefully to make sure they’re a proper fit for each unique employee population.
Transitioning into self-funding can be a bit of extra work. But the benefits, such as more control and lower costs, are very worthwhile. Captives can make entering this space easier and more accessible—and ensures lowering costs is achievable.
What makes Meritain Health® unique in the captive space?
As one of the largest third party administrators (TPAs), we work with the best and brightest captive managers in the industry. But we’re also well-versed about captives in our own right.
We have an entire in-house captive division dedicated to this portion of our business. This team is solely focused on serving our captive partners, customers and members. They have the knowledge and expertise to really understand what makes captives different. And at the end of the day, they make sure our captive relationships are successful, are able to grow with us and keep moving forward.
How to learn more
When you’re ready to learn more, reach out to your Meritain Health representative. We’ll assess if joining a captive is the right move for you or the employers you work with. And we can walk you through everything you need to know about making self-funding more accessible with captives.
