When determining the best value for your benefits costs, its critical to have a broad understanding of available risk mitigation strategies—especially if you’re a self-insured organization.
If you are a self-insured employer, you’re in good company as the percentage of self-insured models in the market hit 60% in 2015 and continues to grow rapidly. While this model increases your control and flexibility, it can also elevate risk and unpredictability—which can be daunting if you’re responsible for covering claims.
So, as a self-insured company, how do you maximize the value of your benefits spend while simultaneously reducing risk and volatility? One answer may be a group medical stop-loss captive.
First, the Basics.
What is a group medical stop-loss captive? A group medical stop-loss captive is a group of like-minded, self-insured employers that jointly own a captive insurance company. These onshore, domestic-based captives provide increased flexibility with benefits costs and greater control of plan design for employers. And they provide year-to-year protection from risk.
Many captives also implement risk controls – like wellness programs, population health management and incentive-based plans. These programs are proven to reduce costs and claims.
How do captives work?
- More predictable claims, up to a specified amount, are covered by the employer.
- Each employer pays monthly into a “pool” to cover claims that surpass the specified limit within a given year (captive layer). If there’s money left in this pool at the end of the year, the group shares the profit.
- Each employer also pays into a separate pool as they join the captive (collateral layer). When claims exceed the amount in the captive-layer pool, these funds cover the costs.
- For catastrophic claims, a separate insurance company covers the costs for everyone in the captive. This coverage (stop-loss insurance) helps protect against claims that exceed an annual cap (or if the total of all claims exceeds this cap).
Now, the Big Picture.
Captives are created by employers like you for employers like you. Group members are carefully vetted before being accepted to ensure the lowest risk and highest value possible – for everyone.
Joining a captive will enable you to:
- Increase control and transparency. Gain better visibility into your healthcare spend, access comprehensive data, and gain more control over your plan design.
- Reduce costs. With fewer regulatory expenses and taxes, and a selective risk pool, your costs will decrease.
- Reduce unpredictability. Since the group covers some of the larger claims, you’ll have fewer unexpected costs.
- Get year-over-year stability. Create a long-term, health-financing strategy to obtain greater stability and further reduce risk.
Are You Eligible?
If you’re a small- to mid-sized, self-insured company you should consider joining a captive. A captive enables you to enhance your benefits value, giving you more control over your plan, and reducing costs and risk.
And it’s important to have an insurance partner by your side throughout the process – to discuss and consider options with.
We Have Your Back.
Many companies are unaware a captive is even a viable option – or they don’t fully understand what it entails. Pritchard & Jerden is here to help.
We believe that benefits should actually be beneficial. Our clients count on us to help them vet their plan options, and we can do the same for you. We can work with you to determine if a captive is a good fit for your company, and if so, find the best one for your needs.
If you’d like some more information on group medical stop-loss captives, contact P&J today. We’d love the opportunity to help improve your benefits experience.1