☰A health insurance captive is a captive insurance company used to fund employee health benefits, most often by writing the medical stop-loss coverage that protects a self-funded plan from severe claims.
Instead of paying a commercial stop-loss insurer, the employer's plan buys that protection from an insurance company the employer owns alone or co-owns with other employers in a group captive.
The mechanics mirror the property and casualty side. Premium that does not pay claims accumulates as surplus in the captive, and the claims data belongs to the employer instead of the insurer, so the plan's cost drivers can be seen and managed directly. In a group captive, mid-sized employers pool stop-loss risk with peers to smooth the volatility. Health spend is often a company's largest insurance line, which is why benefits have become one of the fastest-growing uses of captives.
Some benefit lines carry extra regulatory requirements, including Department of Labor involvement for certain ERISA-covered benefits, so the structure will involve a legal opinion from the start. The medical stop-loss entry covers the most common version in detail.