This term specifically refers to coverage being removed for one element of an employee benefit provider to use a different vendor. For example, removing dental benefits from a health insurance scheme to provide them through a different company. This is mainly for medical benefits which are not included in the health insurance contract and being financed separately; examples include prescribed medication, dental care, vision care and mental health cover.

Within a carve – out, the employer actually opts out of specific services with a particular vendor and contracts another to deliver them; this could be mainly for better services options offered.