Sustainable growth is one of the primary responsibilities and challenges for a health plan CFO. When membership surges and new programs roll out, capital requirements become increasingly cumbersome. Statutory reserves tie up millions, and suddenly CFOs must decide: Do you borrow at high interest, give up equity or halt momentum?
Meanwhile, the environment is getting tougher. Major players, including UnitedHealthcare, Aetna and Humana, are withdrawing from Medicare Advantage markets. Medical costs are rising, regulations keep shifting and margins are shrinking.
That’s why flexible, non-dilutive capital matters more than ever. Enter capital-motivated reinsurance.
Capital motivated reinsurance is a quota share reinsurance structure that allows regulated health plans to free up statutory reserves without taking on debt or giving up equity. By transferring reserve obligations to a reinsurer for a fee, health plan CFOs gain flexible, non-dilutive capital to support growth, expansion and market volatility.
Think of capital-motivated reinsurance as a way to unlock cash without increasing debt or giving up ownership. Health plans enter into a quota share agreement with a reinsurer that transfers the statutory obligation of their reserves in exchange for a modest fee. The reinsurer posts the reserves on behalf of the health plan, and the capital that was previously tied up is now available to deploy elsewhere.
This matters because the advantages go straight to the heart of today’s financial challenges:
These features make capital motivated reinsurance a powerful tool for CFOs seeking sustainable growth, especially as traditional financing options become less attractive and industry volatility increases.
The most common structure is a quota share arrangement. Typically, you cede a portion of your risk, like 50% of a targeted block, to the reinsurer and pay a fee, often around 1% of ceded premium, in exchange for capital relief. Any savings or losses incurred on that population are either returned to the health plan via an experience refund or reinsurance claim.
On paper, claims and premiums flow between you and the reinsurer through bordereaux and settlement statements. But in practice, the only cash that typically changes hands is the fee and any loss settlement. While these agreements place genuine downside risk on the reinsurer, experience refunds and loss carry-forward provisions help offset adverse results in the long term.
The best health plans for capital motivated reinsurance are:
By contrast, hospitals and physician groups are usually not a fit because they don’t hold statutory reserves in the same way a health plan does. Plans seeking a last-minute “lifeline” to avoid insolvency are also unlikely to qualify, as reinsurers prioritize partners with strong, stable performance.
For many CFOs, it’s one more tool to consider alongside traditional debt and equity.
Regulators are more cautious following recent plan failures, and they scrutinize these deals closely to ensure consumer protection. States want to know that if a plan cedes reserves, the reinsurer is holding real capital and taking real risk.
A few best practices include the following:
Handled well, these structures can support growth and service expansion without weakening consumer protections.
In 2025, more than 1.8 million Medicare Advantage members were previously enrolled in a plan that terminated in 2024. Major insurers are existing markets and reducing benefits, driven by rising medical costs, regulatory changes like the Inflation Reduction Act, and shrinking margins.
For CFOs, this means greater uncertainty and opportunities to gain market share. Traditional financing options can be costly and restrictive. Capital motivated reinsurance offers liquidity and flexibility without dilution, helping you fund growth while maintaining control.
If you’re exploring capital motivated reinsurance, a practical path looks like this:
Every health plan CFO should understand capital motivated reinsurance and how it can be used as a tool for sustainable growth.
Capital motivated reinsurance can offer health plan CFOs additional flexibility to manage statutory capital while supporting growth initiatives. Determining whether a quota share structure aligns with your financial position and regulatory environment requires thoughtful analysis and early planning.
To continue the conversation, connect with the Risk Strategies Healthcare team and explore whether capital motivated reinsurance may support your organization’s capital strategy.
Josh Gottesman of Brown & Brown Healthcare is a stop-loss and surety broker who specializes in downside risk protection for managed care organizations. He works with a wide range of accountable care organizations (ACOs), health maintenance organizations (HMOs) and provider groups across the country.