One Client Pays Less for Health Insurance Today Than They Did in 2009

Jarid Beck started his career wanting to be a stockbroker and investment advisor, and quickly discovered the part of that job nobody warns you about: the emotional weight of investing other people’s money, and the calls that come in when the market drops. He found he preferred business-to-business work over managing individual anxiety, which pulled him toward tax and risk management work for business owners specifically. In 2004, he and a partner founded Risk Management Advisors, a firm that designs, implements, and manages captive insurance companies — and notably, they later gave up their own investment licenses (Series 6/7) entirely, specifically to keep a clean regulatory line between captive structuring and investment advice.

In Episode 85 of InsurTechTalk, Jarid and I covered what a captive actually is and when it makes financial sense, how a health insurance TPA can profitably take on underwriting risk by simply steering patients toward better-priced (not necessarily lower-quality) providers, and where cyber risk fits into a captive structure as carriers scramble to reprice a category they initially underwrote badly.

About Jarid Beck

Jarid Beck is Director and Co-Founder of Risk Management Advisors, founded in 2004, which designs, implements, and manages captive insurance companies for middle-market businesses. Before founding the firm, he worked in investment advisory and financial planning before shifting toward business-focused tax, insurance, and risk management work.

What a Captive Actually Is, and Why the Tax Treatment Matters

Jarid’s plain-language definition: a captive is an insurance company a business sets up specifically to insure its own risk — obtaining an actual license from a state department of insurance to issue real insurance policies to itself. The key distinction from informal self-insurance, and the actual reason businesses go through the formal structure at all, is tax treatment. Money set aside informally for self-insurance flows immediately into taxable income — you pay taxes on it before you’ve even determined whether you’ll need it for a future loss. Money paid as premium into a licensed captive is expensed like a normal insurance premium and can sit in reserves without triggering that same immediate tax exposure, with taxes only due once underwriting profit is actually determined.

The added benefit Jarid flagged directly, with a Warren Buffett comparison: captives let a business earn investment return on its own reserve float — the same structural advantage Buffett has written about regarding Berkshire Hathaway’s insurance operations, just applied at a smaller scale.

From Fortune 500 Exclusive to Middle-Market Standard

Jarid’s read on where captive adoption has actually grown: captives were historically the domain of publicly traded, Fortune 500-scale organizations, but the real growth today is in privately held middle-market companies — roughly $10 million in revenue up through several hundred million or even a billion, though the specific number matters less than genuine risk scale. Because captives carry real setup and ongoing fee structures, a business needs sufficient premium volume to clear that cost hurdle for the structure to make economic sense. The industries he sees this working best for: manufacturing, real estate development, staffing, contracting, large restaurant groups, mortgage and banking/finance — generally, businesses carrying disproportionate risk relative to their size.

Where Startups Actually Use Captives: Warranty Risk, Not Distribution Capacity

I pushed Jarid directly on whether an early-stage insurtech MGA could use a captive structure to access capacity faster than finding a traditional fronting carrier. His answer redirected the question productively: the clearest startup use case he sees isn’t insurance distribution capacity — it’s product warranty risk, particularly in life sciences. His example: gene therapy companies bringing genuinely unproven, high-cost treatments to market (single treatments running $300,000 to $3 million) face a real payer objection — insurers and self-insured health plans reasonably ask “what if it doesn’t work?” A captive structure lets the manufacturer itself absorb that outcome-based risk directly, rather than relying purely on clinical data to convince a skeptical payer upfront.

The Genuinely Surprising Insight: TPAs Taking On Underwriting Risk

This was the most concrete and useful mechanism in the conversation, and I was candid that I’d never heard of a TPA (third-party administrator) operating this way before.

On the health insurance side specifically, Jarid described increasingly proactive TPAs and brokerages that have gotten genuinely good at steering members toward cost-effective providers for the same procedure — his example: a torn labrum shoulder surgery might cost four times as much at one LA hospital versus another just blocks away, with no meaningful quality difference driving that gap, often reflecting real estate costs or simply how frequently a given facility performs that specific procedure. Because roughly 90% of total claims cost concentrates in a small number of large claimants (everyone else is mostly routine annual checkups), effectively managing that small cohort’s cost dramatically improves the overall risk pool’s profitability.

Once a TPA gets genuinely good at that cost-steering discipline, the economics shift: rather than simply collecting administrative fees and passing all risk through to reinsurance, some TPAs now put real capital at risk themselves via a captive structure, participating directly in the underwriting profit their own cost-management discipline creates — a structural alignment of incentives Jarid described as increasingly common, distinct from how brokers on the P&C side sometimes absorb small losses informally to preserve carrier relationships.

A 13-Year Track Record: Paying Less Today Than in 2009

Jarid’s concrete client example is the clearest illustration of the model working over a long horizon. A client came to Risk Management Advisors in 2007 for a workers’ comp captive (taking the first $250,000 of risk into their own captive), then two years later brought their health plan into the same structure — adopting the data-driven provider-steering approach directly.

The result, looking back roughly 13 years: the client pays less for health insurance today than they did in 2009 — a genuinely remarkable outcome given that health insurance inflation has historically run roughly four to five points above general inflation almost every year. Jarid attributes this directly to having genuine ownership of and access to their own claims data, and actually acting on it (steering employees to cost-effective, not just any, providers) rather than simply absorbing annual premium increases passively.

Cyber Risk Inside a Captive: Two Different Structures

Jarid described two distinct ways clients handle cyber risk through a captive:

• Full self-insurance — some clients simply write the entire cyber policy inside their own captive rather than buying from a traditional carrier at all
• Gap/supplemental coverage — more commonly, clients buy a standard cyber policy from a broker, but layer a supplemental captive-backed policy specifically to respond to claims that fall into coverage gaps or exclusion disputes in the primary policy

His account of how the cyber market got into its current pricing mess is genuinely instructive: early cyber underwriters didn’t understand the risk they were pricing, leading to policies riddled with exclusions and mismatched coverage. Carriers then hired technically literate underwriters, wrote much broader coverage to fix the gaps — and then absorbed heavy losses because pricing hadn’t caught up to the newly broad coverage, especially as phishing and ransomware attack frequency accelerated. Carriers are now working to “right-size” both coverage scope and pricing simultaneously, which makes cyber a genuinely difficult category to buy into confidently right now — exactly the environment where a captive-backed gap policy adds real value.

Systemic Cyber Catastrophe: A Genuinely Unpriceable Risk

We spent real time discussing a specific regulatory development: a Lloyd’s underwriting directive (issued around August of the prior year, with an effective date around March 2023) explicitly excluding state-backed cyberattacks from standard cyber coverage. My framing, which Jarid engaged with directly: a genuinely catastrophic, infrastructure-targeting cyberattack (his example extension: taking down an isolated grid like Texas’s) represents a loss category on a scale closer to a hurricane or earthquake than a typical breach — with cascading GDP and quality-of-life effects that are genuinely difficult to attach a dollar figure to, given how novel and unprecedented true infrastructure-scale cyber catastrophe still is as an insured risk category.

The Real Value of Reinsurance Access Through a Captive

Beyond the tax and float advantages, Jarid identified a second concrete benefit of the captive-plus-reinsurance structure: market access. In health insurance specifically, a business shopping for direct coverage in California might realistically have access to only about five major carriers. Once you’re purchasing stop-loss reinsurance behind a captive structure, that pool expands to roughly 25 potential reinsurance markets — meaningfully more competitive capacity, particularly for harder-to-place or more specialized risk, than the retail carrier market alone offers.

How Risk Management Advisors Actually Works With a New Client

Jarid walked through the firm’s typical engagement sequence: an introductory call and education session, gathering basic underwriting information and existing policy documents, then producing a preliminary feasibility study — a document outlining two or three specific ways a captive program could be structured for that business, giving the prospective client an actionable framework to decide whether to move forward. If they proceed, Risk Management Advisors sets up and then manages the captive going forward, sometimes handling reinsurance placement directly and sometimes working alongside the client’s existing broker (Aon, Marsh, or similar), depending on how the opportunity originated and how specialized the risk is.

Advice: Read Past the Headlines

Asked for closing advice, Jarid recommended Factfulness by Hans Rosling — a book making the data-driven case that the world, on most measurable dimensions, has been improving even as media coverage trends toward amplifying fear and crisis. His personal takeaway: engaging directly with underlying data, rather than absorbing headline-driven narrative uncritically, is a discipline worth applying broadly — not just to reading the news, but to how a business owner should actually evaluate their own risk and cost trends rather than assuming the trajectory everyone else describes automatically applies to them.

Key Takeaways

• A captive’s core financial advantage is tax treatment — premium paid into a licensed captive avoids the immediate taxable-income exposure that informal self-insurance triggers, while also letting the business earn investment return on its own reserve float
• Captive adoption has shifted from Fortune 500-exclusive to genuinely accessible for privately-held middle-market businesses, provided the business has enough risk scale to clear the structure’s fixed cost hurdle
• The clearest startup use case for a captive isn’t distribution capacity — it’s warranty-style outcome risk, particularly relevant for life sciences companies bringing unproven, high-cost treatments to market
• Health insurance TPAs increasingly take on genuine underwriting risk themselves by getting disciplined about steering members to cost-effective (not lower-quality) providers, aligning their own incentives directly with the cost savings their data-driven steering produces
• A well-run captive combined with genuine claims-data ownership and provider steering can produce a multi-decade cost trajectory that runs meaningfully below industry-wide health insurance inflation, not just a one-time savings event
• Cyber insurance remains genuinely difficult to buy confidently right now because carriers are simultaneously right-sizing both coverage scope and pricing after years of broad, underpriced policies — making captive-backed gap coverage a genuinely useful supplemental structure
• Systemic, infrastructure-scale cyberattacks represent a catastrophe risk category still lacking a mature pricing framework, distinct in kind (not just scale) from typical breach or ransomware losses most cyber policies were built to cover