Traditional healthcare plans do not always work out for every employer, particularly for those who run a small- or medium-size business. One way advisers are helping their clients find an alternative means of self-funded health coverage and adding an extra layer of protection from excessively high individual or aggregate health claims is through use of medical stop-loss insurance captives.
These captives save money through the following means:
- Elimination of carrier profit and premium taxes;
- Improved cash flow as the employer holds on to the claim lag between date of service and date of payment;
- Exemption from state mandates (but not from ACA mandates as they currently stand);
- Reduced administration fees, as these are bifurcated from the claims costs.
Medical captives “give [advisers] just another tool for their toolbox to differentiate themselves and add more value to what they provide to their clients,” says Bob Madden, employee benefit consultant for benefit firm Lawley. “There are not a lot of brokers or benefit consultants who deal with these types of things, so if you’re one that aspires to learn more about this environment and become known for it and become an expert at it it’s going to open up more doors for you.”
Also see: “Navigating compliance issues under Trump.”
Madden adds that more brokers do not pursue medical captives as an option for their clients because many are only trying to get a broker of record letter and just sell insurance.
“The programs, like captives, are an alternative financing mechanism, so it probably requires a little more sophistication, maybe a little more experience or dedication,” Madden says. “You have to have knowledge about wellness, disease management and cost containment strategies if you are going to be successful working in that self-funded environment.”
Detailed claims analysis
Katie Przybyl, director of HR at Graphic Controls, says her company has used a self-ensured captive plan for six years and switching from a traditional medical plan has improved the way they do their reporting.
“Our broker can report on where the cost of our healthcare is going so we can put programs into place to help educate our employees,” Przybyl says. “A couple of years ago we had a lot of claims for diabetes, so we did a nutrition program on diabetes.”
She says that the diabetes claims were evened out after the nutrition program concluded. “Also, going with a captive, we have put in a wellness incentive every year, so people can go through wellness testing. By doing that, we are getting a large amount of our employees going to the doctor at least once a year,” she says.
George Huyler, vice president of HR for ConServe, says their broker is the glue that has kept all the members of their captive together by offering guidance, similar to Graphic Controls’ experience, about what type of programs they should initiate to help retain lower claims cost.
“The captive itself is like 15 companies and we all have day jobs running our own businesses and we all have representatives through the captive,” Huyler says, adding that Lawley serves as the “touchpoint” for all communication.
Madden says despite the uncertainty today’s political environment has created for the healthcare industry, medical captives could continue to see an increase in participation because more employers are demanding alternative strategies to keep their healthcare costs low.
“Our markets are usually dominated by companies like Blue Cross Blue Shield, United, Cigna and Aetna,” Madden says. “Healthcare is very much delivered on a regional basis, so health insurance solutions are on a regional basis, and employers are frustrated with the oligopoly where there is only a limited option.”
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