The 2026 benefits renewal season is proving to be one of the most challenging yet for many employers. Some are facing steep increases in their medical renewal quotes, with hikes reported as high as 50%. Rising healthcare costs fueled by inflation, increasing claims, and tightening insurer markets are driving these sharp premium spikes. In this environment, employers are searching for smarter, more sustainable ways to manage healthcare expenses while still offering quality benefits to their employees – like self-funded captives.
What Exactly Are Self-Funded Captives?
A self-funded captive is a collaborative insurance model where a group of companies comes together to form a captive insurance company. This collective entity pools healthcare risks and funds from member companies to pay for employee medical claims and related costs. Unlike traditional fully insured plans, where premiums are fixed and often inflexible, captives allow members to self-fund their benefits but share the financial risks among the group.
Because the captive operates like its own insurer, members have the freedom to design custom health plans tailored to their workforce’s needs instead of settling for one-size-fits-all insurance products. They also share stop-loss coverage to protect against very large claims, further smoothing out financial volatility. This structure helps especially small and midsize employers gain cost stability, transparency, and control over their health benefits programs.
Why Are Self-Funded Captives Gaining Popularity?
- Greater Cost Control: Unlike fully insured plans with preset premiums, self-funded captives make you pay primarily for actual healthcare usage. This means lower fixed costs and the ability to manage variable costs through plan design and wellness initiatives. Captives can even earn investment income on premium reserves, helping improve financial outcomes.
- Plan Customization: Captives empower members to tailor deductibles, copays, coinsurance, networks, and supplemental benefits. This customization translates to better employee satisfaction and often healthier utilization patterns.
- Financial Returns: When medical claims costs are lower than anticipated, the surplus funds remain with the captive. These unused premiums can be returned to members as dividends, rather than profits going to an insurance carrier. This incentivizes strong claims management and responsible plan usage.
- Cost Stability and Risk Sharing: By pooling risk across multiple employers with similar profiles, captives reduce the impact of large, unpredictable claims for any single member, resulting in more consistent renewal rates and less volatility compared to fully insured or standalone self-funded plans.
- Integrated Data and Wellness Support: Many captives come with integrated analytics and wellness resources. This deeper insight into claims and utilization helps members proactively address health risks and control future cost trends more effectively.
- Increased Purchasing Power: Joining a group captive usually means better leverage when negotiating contracts with healthcare providers and vendors. The collective buying power of the group improves terms, pricing, and access to services.
What Does Joining a Captive Entail?
While self-funded captives offer many advantages, they require commitment and collaboration. The setup involves careful planning, selecting the right partners (stop-loss insurers, third-party administrators), and ongoing engagement to manage the plan and share data transparently with fellow members.
Captive membership best suits employers who want to:
- Take a proactive role in managing employee benefits
- Have a sufficient risk tolerance and appetite for data-driven decisions
- Collaborate and share risk with like-minded organizations
- Look beyond short-term savings toward sustainable cost management.
The Bigger Picture: Shifting Trends in Employer Health Plans
In recent years, over 60% of covered workers in the US have moved to some form of self-funded plan, and interest in group captives continues to rise rapidly as employers seek alternatives to fully insured models, according to Virtue Alliance. This growing trend reflects a market-wide shift toward smarter self-funding approaches that balance cost, predictability, and quality care for employees.
Key Takeaway for Employers Facing Renewal Hikes
If your renewal quote feels like a double whammy with large premium increases plus added cost-sharing, exploring self-funded captives is highly worthwhile. They offer a path to regain control over healthcare expenses while fostering collaboration and innovation among peer employers. Doing your homework on captives, understanding your company’s unique risk and claim patterns, and learning from others in the HR and benefits community can help you make a confident, strategic decision for 2026 and beyond.
If you need help tracking benefits usage and ROI on benefits, Eppione provides you with advanced reporting to help track costs and optimize spending for more strategic initiatives. Learn more about Eppione’s Advanced Reporting or schedule a demo to see how it works in real-time.
