Medical Captives
What are Medical Stop Loss Group Captives?
Simply put, a group captive is an insurance company that provides insurance to and is controlled by its owners.
Medical captives (also called captive health insurance or group captive health plans) are an alternative funding strategy where employers create or join an insurance company that they collectively own to finance employee healthcare claims. Instead of paying fully insured premiums to a traditional carrier, employers share risk, gain claims transparency, and potentially retain underwriting profits.
How Medical Captives Work
A medical captive typically combines:
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Self-funded health plans
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Shared risk pools among employers
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Stop-loss insurance protection
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Claims management and analytics
Employers contribute funds into the captive, which pays claims and administrative expenses. If claims are lower than expected, surplus funds may be returned to members or rolled forward.
Types of Medical Captives Single-Parent Captive
One large employer forms its own captive insurance company.
Best for:
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Large employers
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Strong cash reserves
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Sophisticated HR/finance teams
Group Captive
Multiple employers join together to share risk and purchasing power.
Best for:
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Employers with roughly 50–1,000 employees
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Companies wanting predictable long-term healthcare costs
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Employers transitioning from fully insured to self-funded plans
Advantages of Medical Captives Greater Cost Control
Captives can reduce fixed carrier costs and profit margins associated with traditional fully insured plans. Many employers see lower long-term trend increases.
Claims Transparency
Employers gain detailed insight into:
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Medical claims
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Pharmacy utilization
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High-cost conditions
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Wellness opportunities
This allows smarter plan design and cost containment.
Custom Plan Design
Captives allow employers to tailor:
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Deductibles
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Networks
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Copays
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Wellness incentives
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Preventive care programs
instead of using standardized carrier plans.
Potential Refunds or Dividends
If claims perform well, members may receive:
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Surplus distributions
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Reduced renewal costs
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Reserve growth
Potential Risks & Challenges Upfront Capital Contribution
Most captives require:
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Initial buy-in funding
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Reserve contributions
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Commitment to long-term participation
Shared Risk Exposure
Poor claims performance from the group can impact overall results.
More Employer Involvement
Captives require:
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Ongoing claims review
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Risk management participation
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Strategic benefits planning
Not Ideal for Every Employer
Captives generally work best for employers with:
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Stable workforce demographics
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Commitment to wellness initiatives
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Financial stability
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Long-term benefits strategy
Common Medical Captive Components
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Medical stop-loss coverage
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Pharmacy benefit management (PBM)
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Third-party administrator (TPA)
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Reference-based pricing
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Wellness and disease management programs
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Data analytics and reporting
Ideal Candidate Profile
Medical captives are often a strong fit for employers who:
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Have 50+ employees
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Experience large annual renewals
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Want more control over healthcare spending
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Are open to self-funding strategies
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Have relatively healthy claims history
