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Employee Benefits (Healthcare Captive)

Most companies have very little control over healthcare benefits since that industry changes frequently. This leads companies to send a high portion of payroll expenses on benefits for your employees especially when your benefits are high quality which is an essential part of employee retention. However, in order to have flexible finances in an ever-changing environment, it could save costs by self-funding health insurance. Because captives are becoming more and more efficient, even companies wanting to insure as little as 50 people can make financial sense. This type of captive is called self-insured retention (SIR).

How Self-Insured Retention Works

Like choosing a higher deductible in other policies, a large SIR can create a decrease in premium costs for a business. Although these self-funded healthcare plans aren’t new, they are present a challenge to small and mid-sized businesses.

Who is a Good Fit for an Employee Benefits Captive?

Generally speaking, small and mid-market companies don’t have the same balance sheet and free available cash flow as their Fortune-rated brethren. Having to attribute a portion of revenue towards the cost of a new benefit can put a strain on operating budgets. For businesses that feel this pinch, there is a propensity to use the reserves that were earmarked for the healthcare coverage to shore up revenue shortfalls elsewhere in the company.

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