Self-Funded Employer Health Plans: Captive vs. MEWAs for Control & Cost

As healthcare costs continue to rise, more mid-sized employers are considering self-funding their health plans. Benefits, like cost control, plan flexibility, data transparency, are driving the shift. But for employers going this route, the structure of the plan matters just as much as the decision to self-fund.

Two increasingly popular models are the Multiple Employer Welfare Arrangement (MEWA) and the group captive insurance model. Each comes with its own benefits, risks, and compliance considerations, and choosing the right one depends on your organization’s goals, risk tolerance, and internal resources.

What Is a Multiple Employer Welfare Arrangement (MEWA)?

A MEWA allows unrelated employers to pool together and provide health benefits through a single trust. MEWAs were originally designed to help small businesses gain access to affordable health insurance by combining their buying power. Employers pay premiums into the shared fund, which is then used to pay claims or buy insurance on the group’s behalf¹.

Advantages of MEWAs

• Simplified access: MEWAs allow smaller employers to enter the self-funded market with a ready-made structure.
• Reduced risk exposure: Sharing the risk pool with others can protect smaller groups from catastrophic loss.
• Lower administrative lift: Most MEWAs are managed by a third-party, so employers don’t need to handle plan administration in-house².

Disadvantages of MEWAs

• Limited customization: Employers have little to no control over plan design or provider networks.
• Regulatory challenges: MEWAs are regulated at both the federal and state level, and some states prohibit self-funded MEWAs entirely³.
• Financial risk: Mismanagement, underfunding, and lack of adequate reserves have caused some MEWAs to collapse⁴.

What Is Group Captive Health Insurance?

A group captive allows employers to self-fund their health plans independently while joining with other like-minded organizations to reinsure risk. Each participant has its own stop-loss policy, and the group shares a portion of claims exposure through the captive. If claims are lower than expected, employers share in the surplus⁵.

Advantages of Captives

• High control: Employers maintain ownership over plan design, provider networks, and wellness initiatives.
• Transparency: Access to claims and utilization data supports smarter decision-making and targeted interventions⁶.
  Cost savings: Captives often yield 5% to 15% savings over fully insured models, thanks to shared underwriting gains⁷.

Disadvantages of Captives

• Higher barrier to entry: Captives are generally best suited for employers with 50+ employees and the financial capacity to manage cash flow and risk⁸.
• More complexity: Governance, capital contributions, and reinsurance layers can be unfamiliar territory for HR and finance teams.
• Risk-sharing exposure: While mitigated, members still share liability if claims spike unexpectedly.

Why Captives Are Gaining Momentum

The number of mid-sized employers moving toward captives is steadily increasing. According to industry research, the share of employers self-funding jumped from 47% in 2008 to 61% in 2023⁹. Captives give employers the ability to tailor benefits, reduce volatility, and earn back underwriting profits when claims perform well.

Some captives are industry-specific (like healthcare or manufacturing), which aligns employer risk profiles and drives stronger outcomes. Others are broker-led or TPA-supported, giving employers access to preferred vendor contracts and administrative support.

How to Add a Captive or MEWA to Your Self-Funding Strategy

Whether you’re drawn to a MEWA’s simplicity or a captive’s control, getting started begins with asking the right questions:

• What’s our size and risk tolerance?
• Do we have the internal resources to manage claims data and reinsurance contracts?
• How important is plan customization to our benefits strategy?
  

Healthee helps employers evaluate these questions with clarity. Our platform provides claims steerage, provider transparency, and data tools that make self-funding smarter and more manageable. We’ve worked with several clients who said Healthee’s steerage engine made going self-funded possible for the first time — while actually improving the employee experience.

How Healthee Supports Self-Funded Employers

Choosing a self-funded path, whether through a MEWA or a captive, is just the beginning. The real challenge is ongoing: managing healthcare costs, helping employees make informed decisions, and navigating plan complexity without overwhelming your HR team.

That’s where Healthee comes in. Our AI-powered platform empowers self-funded employers with:

• Claims steerage and cost transparency: Direct employees toward high-quality, in-network care that saves money for both employer and employee.
• Real-time benefits navigation: Zoe, our personal health assistant, helps employees understand their benefits and find care 24/7 without contacting HR.
• Plan optimization insights: Use real-world utilization data to fine-tune plan design, track engagement, and forecast costs.
• Support for open enrollment and beyond: Healthee reduces HR workload by automating benefits questions and guiding employees through decisions year-round.

Whether you’re exploring a MEWA, considering a group captive, or building a custom self-funded strategy, Healthee can help you do it smarter.

Leave Self-Assured With Self-Insurance

For self-funded employers, MEWAs and group captives offer distinct paths toward healthcare cost control and plan optimization.

• Choose a MEWA if you want a simple, turnkey option and don’t need deep customization.
  
• Consider a group captive if you’re ready for more control, transparency, and long-term cost savings potential.
  

Both models have a place in a smart benefits strategy — what matters is choosing the one that aligns with your goals. And with the right partner and tech in place, you can reduce risk, improve outcomes, and take back control of your healthcare spend.

References

1. Investopedia. “Multiple Employer Welfare Arrangement (MEWA).” https://www.investopedia.com/terms/m/mewa.asp

2.Captive.com. “Understanding MEWAs: Pros and Cons.” https://www.captive.com/news/understanding-mewas

3.U.S. Department of Labor. “MEWA Under ERISA: A Guide to Federal and State Regulation.” https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/mewa-under-erisa-a-guide-to-federal-and-state-regulation.pdf

4.RAND Corporation. “Understanding the Risks of MEWAs.” https://www.rand.org/pubs/notes/N3496.html

4. Captive Resources. “How Captives Work.” https://www.captiveresources.com

6. Alliant. “Group Benefits Captives Are Changing the Game for Small and Mid-Sized Employers.” https://alliant.com/news-resources/benefits-how-group-benefits-captives-are-changing-the-game-for-small-and-midsize-employers

7. National Law Review. “Funding Employer-Sponsored Group Health Coverage: The Group Captive Solution.” https://natlawreview.com/article/funding-employer-sponsored-group-health-coverage-group-captive-solution

8. McKinsey & Company. “Reimagining U.S. Employer Health Benefits.” https://www.mckinsey.com/industries/healthcare/our-insights/reimagining-us-employer-health-benefits-with-innovative-plan-designs

9. Kaiser Family Foundation. “2023 Employer Health Benefits Survey.” https://www.kff.org/report-section/ehbs-2023-section-10-self-funded-health-plans/