As healthcare providers face mounting operational risks, from rising deductibles to increased risk exposure to events not covered by traditional insurance, many practices are rethinking how they protect their businesses. Increasingly, physicians, dentists, and other healthcare providers are turning to a lesser-known but highly customizable strategy: 831(b) Plans.
An 831(b) Plan, also known as micro-captive insurance, is a risk management tool that allows qualifying small to mid-sized businesses to self-insure to cover risks that may be expensive, limited, or unavailable through traditional insurance. Established under Section 831(b) of the Internal Revenue Code in the 1980s, these plans have gained renewed attention in recent years, particularly following the pandemic, as traditional insurers have narrowed coverage and expanded exclusions.
“With healthcare practices, the risk profile has changed dramatically,” said Van Carlson, CEO of SRA 831(b) Admin. “What used to be considered low-probability events, such as extended shutdowns, utility failures, data breaches, or large out-of-pocket deductibles, are now very real business threats.”
That value becomes clear when real-life examples show how these plans are the solution for real situations.
When a Natural Disaster Shuts Down Care
For a professional dental practice in a hurricane-prone region, a recent business disruption became a reality. Generating about $3.5 million annually and employing 12 staff members, the practice had proactively established an 831(b) Plan to address business interruption risks not fully covered by traditional insurance.
That decision proved important when a major hurricane caused widespread infrastructure damage that cut off power, water, internet, and phone service for five consecutive days. The practice was forced to suspend operations while sourcing potable water externally, as patient visits declined sharply across the federally declared disaster area.
Initial revenue losses exceeded $58,000, with continued reductions in patient volume causing losses beyond $85,000. Traditional insurance didn’t cover business interruption.
“Business interruption is one of the most misunderstood gaps in insurance,” Carlson said. “Most policies were not designed for multi-day utility outages that ripple through patient access and scheduling.”
Through its 831(b) Plan, the practice filed a claim under a specialized business interruption policy tailored to utility disruptions. The claim was validated quickly, and with a policy limit of $70,000, the plan significantly offset the financial damage. This support allowed the practice to recover without jeopardizing staff retention or continuity of patient care.
Managing the Cost of High Deductibles
Operational risk does not always come from large-scale disasters. For many healthcare practices, rising deductibles represent a disruptive financial threat.
A Midwest-based healthcare practice with approximately $3.5 million in annual revenue implemented an 831(b) Plan administered by SRA to address the growing exposure created by higher deductibles on its traditional insurance policies.
Like many owners, the practice elected higher deductibles to control premium increases and reduce the risk of non-renewal. That strategy proved effective until a break-in resulted in property damage and theft.
While the insurance carrier paid the claim, the majority of the loss fell under the deductible, creating an unexpected strain on cash flow. Rather than absorbing the cost internally, the practice filed a deductible reimbursement claim through its 831(b) Plan.
“The insurance market is pushing more risk onto healthcare owners,” Carlson said. “With an 831(b) Plan, they can tackle that risk proactively, instead of waiting for a crisis to force their hand.”
For the Midwest-based healthcare practice, the plan’s direct writer reviewed the claim, confirmed coverage, and reimbursed the full deductible amount to help stabilize the practice’s finances during recovery.
A Strategic Tool for Modern Healthcare Risk
With an 831(b) Plan, businesses can set aside tax-deferred funds to self-insure against risks. For healthcare practices, this provides a smarter way to handle emerging threats, underinsured gaps, and unpredictable costs while keeping cash flow steady and building reserves for future losses.
“Healthcare practices are turning to 831(b) Plans to address real gaps, whether it’s downtime from a disaster or deductibles that have climbed into six figures,” Carlson said.
These examples show how 831(b) Plans give healthcare practices practical tools to manage both sudden crises and ongoing financial exposures. For many practices, the question is no longer whether a disruption will occur. It is whether they have planned for it.
