As a business owner, you want to make financially sound decisions when it comes to employee benefits. In many cases, that excludes offering a fully paid commercial health insurance plan. However, there are a couple of self-funded options worth considering, such as captives and self insuring. eep reading to learn more about these programs.
In this situation, you will pay for health care costs as they occur. That can translate into serious savings in monthly premiums. There are a few drawbacks, though. You will probably need to hire an administrator to manage the plan, which increases overhead. Additionally, a few major claims in a short period of time can also drain resources from this type of plan, potentially making it unsustainable.
Insurance captives are also self-funded, but they are run very differently. They operate as a subsidiary of a company, and administer all claims depending on that company’s needs and position. That offers a tremendous amount of control, something managers may appreciate. While there are up-front costs of establishing a captive, you may realize income from premiums and there can also be certain tax advantages to running them.
If you are considering a self-funded insurance option, be sure to carefully weigh captive vs self health insurance programs to see which one better fits your needs and financial situation.