Captives for medical plans have become more popular as employers look to control healthcare costs, manage risk and increase flexibility of their benefit plans. These advantages have led some employers to also consider a captive arrangement for their voluntary benefit plans. However, since they are funded by employee dollars, voluntary benefit captives have unique aspects and inherent risks that require careful consideration.
Captives dedicated to voluntary benefits are a relatively newer concept. However, the market has seen numerous recent entries, generating more buzz. As interest grows, employers need to understand the potential risks and the best strategies for approaching alternative voluntary benefit arrangements.
Types of Voluntary Benefit Funding Arrangements
Three primary types of alternative funding are emerging in the voluntary benefits space. Two of them can be classified as captives and the third, although not a captive, works similarly.