What is a group captive, and who is it for?

A group captive is self-funding with a safety net made of your peers.

Here's how the layers work:

Your layer. You pay your own smaller claims, the same as any self-funded plan.
The captive layer. Mid-size claims are pooled across all the employers in the captive.
The reinsurance layer. A reinsurer covers the catastrophic claims on top.

The result is that one bad claimant does not wreck your year, because it is spread across the group. And when the captive performs well, members can share in the underwriting profit that a carrier would normally keep.

The catch is that you are sharing risk with your peers, and they are sharing it with you. Captives work best for employers who are committed to managing cost: good data, real plan management, and leadership that treats the health plan like a line on the P&L, not a bill. There are financial requirements to join, including collateral, and it is a multi-year commitment, so those belong in the conversation up front.

If you are self-funded today and one large claim keeps you up at night, or you are level funded and ready for the next step but not ready to carry all the volatility alone, a captive deserves a look.

Questions to ask

What is our retention, and what does the pool cover?
How are dividends calculated, and when are they paid?
What are the collateral requirements and the exit terms?

Fully insured, level funded, self-funded, or captive. Which is right for us?

It depends on who you want holding the risk. Fully insured is the simplest and least transparent. Level funding is the usual first step for a healthy group and is most common under 200 employees. Self-funding gives you all the data and keeps the surplus, in exchange for volatility. A group captive gives self-funded employers the same economics with less volatility by sharing a middle layer of risk with peers.

How do I compare two level funded quotes?

Look past the monthly rate. Check how much of the premium goes into the claims fund (some carriers put about 50 percent there, others 60 to 70 percent) and how much of any unused surplus comes back to you (50, 67, or 100 percent). Two plans with identical rates can be hundreds of thousands of dollars apart on those two numbers alone.

Should we self-fund through a big carrier or an independent TPA?

A carrier ASO bundles the network, PBM, care management, and often stop loss into one vendor, which means strong network contracts and simplicity but less flexibility and less data. An independent TPA lets you pick each piece separately and gives you full claims data, with more moving parts. Spread-out workforces that want simplicity usually fit a carrier. Concentrated workforces that want control usually fit a TPA.