Funding Employee Benefits in a Captive

A healthcare organization with 10,000 employees wanted to implement captive funding for some of their employee benefits without too much change or impact on their current processes.


The organization wanted to expand the use of their Vermont captive to fund long-term disability and group life/AD&D coverage to reduce the overall costs of risk and enhance cash flows to the parent company. Additional objectives included improving operational performance of their benefits programs through integration of coverage from both a funding and process perspective, and building up captive assets for a better return on investment. The client wanted to use its existing carriers in order to minimize any impact on human resources. Moreover, the clients considered the impact on existing carrier relationships, renewal dates, and employee processes, and also acknowledged that the human resources department had a number of program initiatives underway.


Spring conducted a feasibility study to determine if the objectives could be met. Working closely with human resources and risk management, we helped structure the program, obtaining DOL and captive domicile approval. We were able to implement the new structure with existing carriers within a six month time frame.

Spring’s Solutions

After determining that funding long-term disability and group life coverage in a captive would meet their objectives, we transitioned the existing carriers from fully insured to fronted contracts, and confirmed that the claims and operational process for human resources and employees did not change. Additionally, we negotiated program savings that could eventually be passed on to employees, leading to a savings in the HR budget and creating financial reports to better manage the program.


The savings as compared to the fully insured arrangements were over $7 million in the first year. The organization was able to maintain the same operational and claims processes for human resources and employees, but with improved information flow resulting from the new reporting formats.