Commentary: Historically, we haven’t talked about captives when it comes to employee health benefits, but we’re starting to. As employers grapple with how best to provide quality benefits for employees and comply with the Affordable Care Act, they’re seeking out new strategies. Captives are an interesting approach that can work for some plan sponsors.
The advantages of self-funding include the opportunity for cost savings and plan flexibility. Companies that self-insure are, ostensibly, betting on themselves. They are willing to gamble that their claims will be less than what they’re insured for, which in turn will give them a dividend for their strong performance. Participating in an employee benefits captive is doubling down on that bet.
