What Is A Medical Captive And Is It Bad?

Stethoscope with clipboard and Laptop on desk,Doctor siting across from patient, Healthcare and medical concept

A medical captive is a type of insurance arrangement that allows businesses and employers to self-insure their health care costs. This means the company will assume financial responsibility for any medical expenses, rather than purchase coverage from a traditional insurer. It also means they can take advantage of potential cost savings by controlling how their healthcare dollars are spent.

While a medical captive can be a great option for businesses that want more control over their healthcare costs, there are some drawbacks as well. In this blog post, we will explore the pros and cons of medical captives and help you decide if this type of health insurance is right for your business.

What is a Medical Captive?

A medical captive is a type of insurance company that provides coverage exclusively to its parent or affiliated healthcare organizations. The purpose of setting up a medical captive is to insure the risks inherent in providing healthcare, such as rising malpractice costs, increased patient care costs and unpredictable losses from litigation. Medical captives are usually established by large hospitals, health systems, universities and physician groups, who use them to protect themselves against specific risks associated with the delivery of healthcare services.

How Captives Operate

Medical captives are typically funded by reinsurance companies or other insurance carriers and structured as either a single-parent captive or a group captive. Single-parent captives are owned by one parent organization and provide coverage for just that entity’s risks. Group captives provide coverage for a group of organizations, allowing them to pool their risks and receive more favorable terms.

How Captives Are Regulated

Medical captives are regulated by state insurance commissioners. They must file annual financial statements with the appropriate state authority, comply with all applicable laws and regulations, maintain adequate capital and surplus levels and secure an independent audit each year.

Additionally. . . 

In addition to providing coverage for medical malpractice and other healthcare risks, medical captives can also provide self-insurance for operational and administrative expenses such as marketing costs, employee benefits and worker’s compensation. Captives can also offer additional services such as risk management consulting, claims administration and loss control services.

Medical captives are an increasingly popular option for healthcare organizations looking to manage their risk and save on insurance costs. They offer the potential to reduce overall costs while providing greater control over how they are managed and protected.  However, it is important to understand that medical captives are not a substitute for traditional health insurance – rather, they provide an additional layer of protection that can help mitigate certain risks.  As such, it is important to consult with an experienced insurance broker or captive manager to ensure a medical captive is the right choice for your organization.

Is a Medical Captive Bad? 

Medical captives are not inherently bad, as long as they are used responsibly. In some cases, a medical captive can be an efficient and cost-effective way to manage health care costs. However, it’s important for businesses to do their research and understand the risks associated with this type of arrangement before committing to it. There is a potential for loss if a medical captive is not managed properly. 

Additionally, it’s important to consider the pros and cons of this type of arrangement in comparison to traditional insurance coverage. Ultimately, the decision about whether or not a medical captive is right for your business should come down to careful consideration of all potential outcomes.

The Pros of a Medical Captive:

  • More control over medical costs – By creating their own plan, businesses can have more control over the medical costs they incur.
  • Reduced administrative costs – Since medical captives are self-funded, administration costs are typically much lower than with other types of health insurance plans.
  • Flexible coverage – Businesses can tailor medical captives to the specific needs of their employees. This gives businesses more flexibility when it comes to deciding what medical services and treatments are covered.

The Cons of a Medical Captive:

  • Riskier proposition – Since medical captives are self-funded, businesses may be taking on more risk than they would with a traditional health insurance plan.
  • Higher medical costs – While medical captives can help to control medical costs, they may still be higher than those of other health insurance plans.
  • Difficult to set up – Medical captives can be complex and difficult to set up, as businesses need to comply with regulations and laws in order to create a medical captive.


As you can see, medical captives have both advantages and disadvantages to consider. It’s important to do your research and understand the risks and benefits associated with medical captives before deciding if this type of health insurance plan is right for your business. With the right information, medical captives can be a great way to provide healthcare coverage to your employees while minimizing medical costs. 

Things to Consider

If you decide to pursue a medical captive, it’s important to understand all the details involved. You should:

  • Select a structure that is appropriate for your business
  • Consider the financial implications of entering into a captive arrangement
  • Fully research potential service providers before committing
  • Set up an internal team responsible for managing the captive and handling any claims that may arise 

Doing your research and understanding the risks involved can help ensure that a medical captive is the right choice for your business and will allow you to take advantage of its potential benefits.

The Bottom Line

Overall, a medical captive can be a great way to manage healthcare costs if used responsibly. It’s important to understand all the details before committing to this type of arrangement and to make sure it is the right choice for your business. By doing your research, you can make an informed decision about whether or not a medical captive is the right choice for you.

If you still have questions regarding medical captives, reach out to us

Or to learn more, read about the differences between standard market insurance and captive insurance programs.