Traditional insurance has had a grip on the economy for several decades and has been reaching extraordinary price premiums for coverage that employees need, said Barbara Weltman, founder of Big Ideas for Small Business.

"Traditional insurance products may not meet a business’s needs, at least not at an affordable price," she said. "Captive insurance can provide broader coverage than available through existing products. This coverage can be tailored to protect against difficult risks."

Captive insurance is an insurance company owned by the people it insures. Unlike mutual insurance companies, which are also owned by policyholders, captive insurance companies are both owned and controlled by policyholders, Investopedia said.

Captive insurance companies can be set up in a variety of ways. “Pure captives” insure only its owners. “Single-parent captives” have a single owner (such as a Fortune 500 company) and “group captives” have multiple owners.

Captive insurance can provide broader coverage than available through existing products. This coverage can be tailored to protect against difficult risks.

While the main reason for captive insurance is risk management, an ancillary benefit for businesses that use captive insurance is that they stand to profit if the company’s underwritings  are sound. Captive insurers generally distribute dividends to owners, according to Investopedia.

Captive insurance is a legitimate tax structure for small business owners. Premiums paid to a captive insurer can be tax deductible if the arrangement meets certain risk-distribution standards.  Thus, the business gets a current year write-off even though losses may never occur.

Captive insurance can meet risk-management needs for a small company while providing financial rewards for it, but this type of insurance is not for everyone.

Health care insurance for employees is of particular importance to many employers. Business owners can participate in captive health care insurance, which has all the same benefits as other niche captive insurances and certain captive insurance companies focus on not following traditional structure as way to meet a client's specific needs.

“At Everlong, we reimagined and redesigned employer-based health care by building high performance health insurance captives that break with tradition,” said Doug Truax, founder and CEO of the company Everlong.