Published by Trustmark Health Benefits on August 13th, 2018

Providing attractive benefits can be a game changer for employers looking to attract and retain top-quality employees, and self-funded health benefits plans are making it increasingly cost-effective for businesses to provide competitive benefits to their people. Self-funded plans remove the insurance carrier from the equation, so instead of paying a flat rate to a carrier for claims, the employer pays only for the healthcare the employees and members use. And that’s good news for employers, because employees are hungry for benefits!


A survey by Glassdoor in 2015* found that 79 percent of employees responding to the survey would prefer new or additional benefits and perks over a pay raise. Providing more appealing health benefits while controlling costs through self-funding gives employers a competitive advantage with prospective new hires and can improve retention for current employees.
But, in order to make self-funded plans feasible, employers need to purchase stop-loss insurance, to protect themselves in the event of catastrophic expenses that would otherwise break the employer’s budget. To find that coverage, employers have options. They can search on the open market from year to year looking for the best deal for their company, or they purchase insurance from a captive insurance company.

Captives Free Employers to Do More

The name may sound ominous, but captive insurance companies provide increased financial freedom for employers. In a nutshell, they are essentially closely-held insurance companies which provide coverage only to their member organizations. Employers look for a company which serves a population of companies such as themselves and then purchase insurance from the company and pay premiums. Fun fact: depending on how the it is set up, the premiums employers pay into the plan may be tax-deductible for the employer. But in addition to possible tax benefits, these companies make it possible for employers to more easily achieve their business goals.

Flexibility and Control

Working with a captive insurance company provides employers with increased control over costs, and flexibility in managing their risk. As business grows, or contracts, their company can evolve with them, providing increased or decreased coverage as the needs of the population change. Also, the value of the captive will grow over time, providing the employer with a kind of control not normally found in insurance coverage. As the employer, and other employers in the same cohort, continue to pay premiums, the value will grow over time–barring catastrophic financial losses–and become better able to take on increased risk over time.  

Freedom for the Future

A captive insurance plan represents an investment in the employer’s future, and in their commitment to providing competitive benefits while controlling costs. When clients are considering the switch to self-funding, explain the strengths of captive insurance and how it makes self-funding even more financially appealing.

* Glassdoor survey