How Employee Benefit Captives Can Accelerate DE&I Progress

How Employee Benefit Captives Can Accelerate DE&I Progress
April 19, 2023 9 mins

How Employee Benefit Captives Can Accelerate DE&I Progress

How Employee Benefit Captives Can Accelerate Diversity, Equity, and Inclusion Progress

Benefit captives support health plan design flexibility and a standard of coverage for all employees.

Key Takeaways
  1. Declining thresholds mean that more small and medium-sized firms are exploring employee benefit captives.
  2. Using captives to address employee benefits can resolve organizational DE&I challenges.
  3. Benefit captives also improve healthcare governance and reduce extra costs associated with traditional insurer plans.

Organizations have made notable progress to embed diversity, equity and inclusion (DE&I) within their culture in the past few years. While DE&I remains a top priority on boardroom agendas, many business leaders are exploring other areas where it can have a positive impact — including employee benefits.

Of the 1,200 global companies that responded to Aon’s 2022 Diversity, Equity and Inclusion Survey, 8 percent offered additional healthcare coverage to lower-income employees compared to the 40 percent of companies that offered additional coverage to high-income employees.

Employee benefits can be a challenging area to erase disparities due to health insurance affordability, local policy design, eligibility limits and minimum headcount requirements within global and regional markets. Local policy constraints mean multinational companies are often forced to compromise on employee benefits in ways they would not normally choose. In a world where the focus on inclusion within preventative care, fertility, gender realignment and other key DE&I areas is increasingly important to companies, so too is having benefits design flexibility across geographical borders.

For many years, large multinational companies were the primary users of employee benefit captives due to the significant health and risk premiums they had available to place in the captive. However, the minimum premium required to make captives financially worthwhile has fallen substantially in recent years and continues to drop.

Small and mid-sized employers can now afford to set up benefit captives — and with this comes many business advantages. Employers benefit from greater employee attraction and retention rates when they provide more affordable healthcare options to a wider audience of employees. Captives can advance DE&I goals by providing employers with more flexibility around healthcare access, including region-specific and socioeconomically diverse employees. 

Next Steps for Embracing Employee Benefit Captives

Employers are adopting employee benefit captives solutions more than ever. Approximately half of Aon’s new captive insurance business originates from conversations generated within our reinsurance solutions practice. Captives can help companies manage their healthcare costs and provide the necessary design and eligibility flexibility to ensure every employee receives a global standard of coverage.

Here’s a brief checklist to find out if employee benefit captives are suitable for your firm:

Can Employee Benefit Captives Help Your Organization Make DE&I Progress?

1. Do your benefits in different regions uphold your DE&I principles?

Companies should ensure employee benefits support aligns with country, region-specific or global DE&I goals so they can address and make progress on local and company-wide DE&I initiatives.

2. Does your employee health insurance plan extend benefits to groups that may be considered ineligible (e.g. hourly or reduced schedule employees)?

When employers consider the healthcare coverage of all employees, they obtain a resolute picture of their healthcare costs and gaps, which affects workforce resilience.

66% of global companies provide flexibility in role design, location and working hours to support experienced or older talent 42% of global companies offer workplace adjustments to employees with disabilities 41% of global employees offer specific mental health support to transgender employees 

8%

of global companies offer additional healthcare coverage to lower-income employees compared to 40% for high-income employees.

Source: Aon’s 2022 Diversity, Equity and Inclusion Survey Report

3. Do you need to increase benefit thresholds to levels that local insurers may consider too risky to underwrite?

Avoid increasing benefit thresholds too far beyond what local insurers would underwrite. Captives set premiums that should be similar to a local insurer.

4. Benefit captives help companies improve healthcare governance by providing greater employer management and flexibility of benefit plan design.

This tactic builds on employee individualization and coverage availability, including addressing common gaps in areas such as fertility treatment and gender dysphoria. Ensure local and regional insurers are providing nuanced healthcare coverage for diverse people needs, large or small in population.

10%

of companies in North America provide healthcare coverage for parental or elderly leave — which is considered a diverse employee need.

Source: Aon’s 2022 Diversity, Equity and Inclusion Survey Report

Quote icon

Leveraging captives is a powerful way to deliver inclusive, equitable and measurable value to a diverse workforce. Employers should ask themselves if their benefits offer truly equitable support for all employees and their families.

Bringing Benefits to Employees Beyond Local Insurer Capability

Healthcare design flexibility, affordability and access are powerful tools to support diverse employees and communities. While the positives of captives are clear, employers should carefully evaluate their benefit plans to identify gaps and improvement opportunities specific to their firm.

To learn how we can help you support your DE&I progress through healthcare benefits solutions, please refer to our key contacts below.

Aon's Thought Leaders

Sven Roelandt
Global Employee Benefits Financing Leader, Health Solutions for Multinationals
[email protected]

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The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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