Self-Insurance vs. Captive Health Insurance

If you are a business owner, you might be under the impression that your only choice in the health insurance market is self-insurance. Though there are benefits to being self-insured, the commercial health insurance market is constantly changing premiums and it might not be your best bet – especially if you are a small business owner or a new business owner with an unsteady income. Read on to discover the differences between self-insurance and captive insurance as well as the pros and cons of each.


It is common, especially for small business owners, to pay for their own employees’ health care benefits out of pocket. In this context, self-insurance might be money set aside by the company in a savings fund, a loss fund, or it could be composed of the company’s after-tax funds.


  • A self-insured plan is financially efficient. You will save the capital you would spend paying the profit margin for a commercial insurance company.
  • You’ll have greater clarity. As a business owner, you know exactly where your money is and for what purpose it will be used.
  • Your employees pay for claims as they occur: this means they do not have to prepay their premium, so they (and you) save money.


  • You might have to pay more initially to have an internal insurance plan.
  • Your company will have to set up self-insurance and choose administrators for claims.
  • If employees incur exceptionally high claims or unexpected medical issues, you will be responsible for processing them.

Captive Health Insurance

Now’s the time to look into non-traditional group health plans. In short, captive health insurance resides in a subsidiary company of the parent company that is set up for one purpose only: to provide health insurance to the parent company’s employees.


  • Healthcare captives can be streamlined to meet your company’s needs: financial control are the key words here.
  • You can pay smaller deductibles. If you have unearned premiums, you may also be able to take in income from these.
  • You have flexibility with underwriting and funding depending on your needs – unlike commercial insurance.


  • It’s all up to you: You are taking on the responsibility of establishing and maintaining the subsidiary company. Therefore, it is your time, your money, and your employees that are at risk.
  • You might have to hire new employees for administrative tasks related to the subsidiary company.
  • Medical captive programs’ set-up costs might be more than you want to – or are able to – afford.

About Haughn & Associates

Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.