CASE STUDY: Understanding Health Insurance Captives – A Guide for Employers

Mar 20, 2024

As an Executive tasked with cutting costs while simultaneously retaining top talent, you’re continuously seeking innovative solutions to manage costs and offer competitive packages. 

One such solution gaining traction is Health Insurance Captives. 

This alternative risk financing mechanism can offer substantial benefits for employers, making it a prime option worth considering for those companies looking to optimize their benefits strategy. Below, we dive into Health Insurance Captives and all share insights employers need to know. 

What Is a Health Insurance Captive?

A health insurance captive is essentially a form of self-insurance where multiple organizations come together to pool their risk. Unlike traditional insurance, where premiums are paid to an external insurer, captives allow members direct involvement in their insurance operations, including claims management, underwriting and investment income. 

This model is structured and managed through a captive insurance company, which is owned by its insureds. Industries ranging from healthcare to construction and beyond have leveraged captives to reduce insurance costs and gain more control over their risk management practices.

Advantages of Health Insurance Captives

The appeal of health insurance captives lies in their numerous advantages:

Cost Savings

By pooling resources, members can achieve economies of scale, leverage buying power and see lower administrative costs and premiums.

Control Over Benefits

Employers have greater flexibility in designing benefit plans that fit their specific needs and those of their employees.

Risk Management

Captives offer enhanced control over claims and risk management processes, allowing members to implement strategies that can reduce claim costs and improve employee health outcomes.

Improved Employee Satisfaction

Employers aren’t the only ones who reap the benefits of a health insurance captive. Employees often see affordable co-pays and access to top-quality providers.

Considerations for Employers Regarding Health Insurance Captives

Before diving into a captive, employers should weigh these factors:

Financial Commitment

Initial capital investment and ongoing contributions are required to fund the captive.


Members must be willing to participate in the governance of the captive, which includes decision-making on claims, underwriting and investment strategies.


Captives are not a one-size-fits-all solution. The organization’s size, financial stability and risk profile should align with captive participation’s demands.


Captives must comply with both local and international laws, which can include licensing requirements, capitalization standards, and annual reporting. Employers should seek expert advice to ensure compliance and to stay informed on evolving regulations.

Case Study: Totem’s Experience with a Self-Funded Health Insurance Captive

At Totem, we’re firm believers in the success of Health Insurance Captives not only for our clients but for our organization as well. After dealing with surprise premium increases and a lack of data transparency, we decided it was time to make the switch to a Self-Funded Group Captive.

We partner with Roundstone as our exclusive Health Insurance Captive, and since changing our approach, we’ve seen the following benefits:

Zero Deductibles

Totem transitioned from over $6,000 in deductibles with our PEO plan to zero deductibles with Roundstone. These savings filter down to other areas of the healthcare plan.

Reduced Copay Costs

Roundstone’s self-funded plan achieved lower copays for Totem employees. Lower copays have reduced costs for employees and allow them to access care when they need it.

Personalized Primary Care

Zero deductibles with Roundstone allowed Totem to instate a direct primary care program for employees. We can now visit a primary care doctor once per month, which has resulted in happier, healthier, and more productive employees.

High Return on Investment

The first year after switching to Roundstone, Totem received a 12% refund on unused premiums. Having a data-driven approach to cost containment and the design-your-own-plan approach contributed directly to this high ROI.

Health insurance captives present a compelling option for employers aiming to take control of their healthcare costs and benefits offerings. 

As the healthcare landscape continues to change, captives offer a proactive approach to managing risks and costs, providing a competitive edge in attracting and retaining top talent. 

We encourage not only our clients, but all employers to explore health insurance captives as part of their broader benefits strategy, potentially transforming how they manage employee health benefits.

If you’re interested in learning more about Health Insurance Captives, fill out the form below to download Totem’s latest Case Study.


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