Captive Insurance Solutions for Employers in a Tight Healthcare Market

Editor's Note: This article, provided by Captive Resources, explores how employers are leveraging captive insurance and aligned pharmacy benefit managers (PBMs) to improve the sustainability of their health plans in a tightening healthcare market. It highlights insights from a recent stop-loss leadership roundtable, examining rising claim severity, PBM alignment, data-driven decision-making, and how collaborative captive structures help employers enhance cost control, member outcomes, and long-term plan stability.

How Captives and Aligned PBMs Are Redefining Employer Health Plan Sustainability

As the cost of healthcare in the United States reaches its highest point in over 2 decades, employers are preparing for significant changes in their health plans. According to the Willis Towers Watson (WTW) "2025 Global Medical Trends Survey", employers expect health plan costs to rise by more than 8 percent, driven by the growth of specialty pharmacies, the prevalence of chronic diseases, and escalating claim severity. Many have reached the point where raising deductibles or shifting costs to employees is no longer a sustainable option.

But while these headwinds are undeniable, they're also creating new opportunities. Employers are seeking not just to react—but to redesign. That theme took center stage during Captive Resources' recent live recording of their podcast, Captivating Health Insights. During this episode, "The Future of Captives—Stop-Loss Leadership Roundtable," four industry leaders shared their perspectives on the future of captives and cost management.

Hosted by Maddison Bezdicek, the discussion brought together Steve Gransbury, president of Health Solutions at Captive Resources; Tara Krauss, president of Accident & Health at QBE North America; Brad Nieland, president and CEO at Berkley Accident and Health; and Jay Ritchie, president and CEO at Tokio Marine HCC—A&H Group.

Together, they examined the hardening market, the rise of high-severity claims, and how captives, along with a focus on aligned PBMs, are helping employers navigate change with strategy and stability.

A Tightening Market—and a Growing Opportunity

The stop-loss market continues to face mounting pressure as medical inflation, higher claim severity, and market consolidation prompt insurers to reassess their pricing and capacity strategies.

"Stop-loss is the financial backdrop for self-funding," explained Mr. Gransbury. "Without it, small and mid-sized groups can't absorb large claims. But even as loss ratios rise, there's tremendous opportunity for employers to work collaboratively and control costs at the first-dollar level."

That collaboration is precisely what captives enable—a structure for sharing risk, insight, and innovation. "It's no longer about cutting benefits or increasing co-pays," Mr. Gransbury continued. "It's about sustainability—offering quality health care that employees value, while using collective intelligence to manage risk."

The WTW "2025 Best Practices in Healthcare Survey" reinforces this shift. Employers are actively reassessing their healthcare vendors: 46 percent are evaluating vendor performance, 36 percent have taken medical plans out to bid (with another 50 percent planning to do so), and 75 percent have taken or will take their PBM out to bid. It's a sign that the market's volatility is pushing organizations toward more aligned, data-driven models. Here are a few key takeaways from the episode for employers looking to optimize their health benefits plans.

Captives as Safe Harbor in a Volatile Environment

Once a niche tool for large enterprises, captives are now a mainstream solution for mid-market employers seeking control, predictability, and peer collaboration.

"Captives allow like-minded employers to pool risk, share insights, and stabilize volatility," said Ms. Krauss. "We're seeing an explosion in million-dollar claims—those used to be rare. Now, few employers avoid them entirely. Captives give these groups the scale to manage that exposure."

She pointed to findings from QBE's 2025 Accident & Health Market Report, which reported million-dollar claims nearly doubling over 4 years, particularly in cardiovascular and oncology care.

Mr. Ritchie of Tokio Marine HCC echoed this trend, referencing the Tokio Marine HCC's 2025 Annual Market Report, which also highlights an increase in large-severity claims—particularly those exceeding $2 million. He noted that many of these stem from pediatric cases, which now represent a disproportionate share of catastrophic claims.

"Captives' collective data power helps us see where risks are emerging," he said, "and act earlier to improve outcomes before they escalate."

That data advantage, combined with shared leverage, allows captive members to negotiate more effectively with service partners. "The brilliance of captives," Mr. Ritchie added, "is that every participating employer becomes part of the management team. They're not just buying insurance—they're shaping how health care is delivered."

From Transparent to Aligned: The New PBM Paradigm

One of the most compelling topics that emerged during the roundtable—and the foundation for this discussion—is the evolution from so-called transparent PBMs to what Captive Resources and its partners now call "aligned PBMs."

For years, transparency was the gold standard. Employers wanted to understand where rebates were going and how administrative fees were structured. But as Mr. Gransbury and others noted, transparency alone doesn't guarantee alignment.

An aligned PBM is one whose incentives and strategies are intentionally structured to support the employer's goals—containing costs, improving outcomes, and returning value directly to the plan. In an aligned model, success is shared: PBM margins are tied to measurable savings and improved member health, not to spread pricing or retained rebates.

The roundtable panelists agreed that captives are uniquely positioned to advance this kind of alignment. By pooling data from across the member base, captives create scale that allows employers to evaluate PBM performance side by side—something individual plans can't do in isolation.

"Captives," Ms. Krauss noted, "have the ability to work with other like-minded employer groups to deal with both the large-claim volatility and the aggregate costs that affect overall healthcare spend."

That same principle—collaboration to control the whole cost continuum—is precisely what aligned PBMs represent in practice.

Ultimately, alignment extends beyond PBMs. It's a mindset that ties together every stakeholder in the captive ecosystem—employers, consultants, partners, and insurers—around shared metrics of cost, quality, and access. In a hardening market, that alignment becomes both a differentiator and a necessity.

Harnessing Data and Artificial Intelligence (AI) for Proactive Health Management

Captives stand out because they generate what traditional markets rarely offer: first-dollar data—insights into utilization patterns, disease prevalence, and care pathways. That data is now fueling the next generation of risk management tools.

"I'm an advocate for AI and what it can do today," said Mr. Ritchie. "Machine learning can identify patterns—like early diabetes progression—so employers can intervene before conditions become catastrophic. That benefits both the member and the plan."

Still, panelists cautioned that technology should augment, not replace, human expertise. "We'll always need a human in the loop," emphasized Ms. Krauss. "Trust and relationships can't be replaced."

Mr. Nieland agreed, noting that relationships remain central even in a data-driven world. "In underwriting and claims, we can automate processes, but judgment, empathy, and collaboration are irreplaceable," he said. "Those are what make the captive community work."

Engagement: The Human Element Behind Better Outcomes

Engagement emerged as a recurring theme among both employers and employees.

"Employers didn't get into business to manage health care," Mr. Ritchie remarked. "They need experts and communities who make it manageable." Captives, he said, "turn that burden into a shared mission."

That community model also extends to employee outcomes. "A good outcome for a self-funded plan is a great outcome for American families," said Mr. Nieland. "Captives enable employers to protect employees from rising out-of-pocket costs while maintaining benefit quality."

Ms. Krauss urged employers to see health as a long-term investment, not just an annual renewal challenge. "We can't buy our way healthy," she said. "It starts with education, engagement, and building healthier workforces through prevention, not reaction."

A Tightening Market, but a Bright Future

All four leaders acknowledged the reality of a tightening stop-loss market but viewed it as a catalyst for innovation, rather than a crisis.

"There's plenty of capacity out there," Mr. Gransbury noted. "It's a perfect storm—rising costs, more utilization, higher loss ratios—but it's also a moment for captives to shine. They're a safe harbor for engaged employers who want long-term stability and control."

Mr. Ritchie put it succinctly: "There will always be rewards for those willing to do something different."

The panelists agreed that the future of healthcare risk management depends on alignment among partners, consultants, and captive members. That alignment, powered by shared data and collective accountability, will separate employers who merely endure the hard market from those who seize the opportunity to innovate.

Alignment as a Blueprint for Sustainability

The message from the leadership roundtable was clear: Rising healthcare costs and loss ratios are driving change, but captives provide employers with control through collaboration, shared insights, and smarter cost containment. They also provide the structure and collective intelligence to act differently, aligning incentives, leveraging analytics, and empowering employers to manage costs proactively.

As Mr. Gransbury concluded, "Member-led captives are test kitchens for innovation. They allow employers to experiment, measure, and scale what works."

That spirit of collaboration—and growing trend of finding a PBM that is aligned with an organization's philosophy and values—represents a fundamental evolution in self-funded health care—one built not on reacting to the market but on proactively reshaping it together.

Listen to the Full Discussion

To hear the complete conversation, tune in to Episode 8 of Captivating Health Insights, "The Future of Captives—Stop-Loss Leadership Roundtable."

Listen and subscribe on your favorite platforms, including YouTube, Apple Podcasts, Spotify, Amazon Music, iHeart Podcasts, Pandora, and Pocket Casts, to hear how leading stop-loss experts are shaping the future of captives, controlling healthcare costs, and driving better outcomes for employers and employees.