Health care premiums are expensive enough that more and more businesses are considering options outside of traditional insurance carriers. The most popular and widely available are self-insurance and captive insurance ownership. They have some similarities, but there are some very good reasons to opt for captive ownership instead of simply setting up a loss fund. So, what are the advantages of captive vs self insurance?
Self-Insurance: Simplicity and Control
Self-insuring is essentially just setting aside reserve cash to pay for your employees’ health care while outlining to them the exact coverage provisions offered. That means defining coinsurance percentages and policy limits to make sure your fund has enough in it to cover the costs that come with the territory. Premiums contributed from the employee side add to the fund, and your contribution commitments keep it running. It takes a lot of cash to start, and you have both the burden and privilege of controlling the entire administration of your healthcare in-house.
Captive Insurance Advantages
The biggest advantage of a captive company is insulation. It’s a business owned by your business, rather than an interior department. This lets you bring in partners to share the cost and contribute to the management and to outsource the daily administrative work to a third-party team if you wish. These advantages tend to make the overall costs associated with captive companies lower, which is why more business are choosing captive vs self insurance every day.