Many people ask me about captive insurance arrangements, albeit, single employer or group captive models. Captive insurance arrangements seem to be one of the hot topics in the industry. And, businesses are interested in anything that may help control of escalating medical costs. After all, for employers it’s generally their second or third largest budgetary item.
What are captives? They are an independent insurance company established and owned by at least one non-insurance company to assume the benefits risks of the captive owner (or owners). This arrangement allows the members to benefit from the ownership of an insurance company. They do this by leveraging law of large numbers by pooling members together to purchase stop loss insurance and reduce their administrative costs. The premise being for the small employer something they would not otherwise be able to do on their own.
Why are they captivating? They allow small employers to control and build a strategy to manage their group medical plan costs.
With risk there is reward. captive arrangements allow employers to benefit from a good claims year. And, that means the potential of a refund at year end.
In my experience, I have found that the captive arrangement is diligent about maintaining costs and providing a “hands-on” approach in terms of claims management.
There is no magic bullet in terms of healthcare costs. However, captive insurance arrangements may be a viable way for the small employer to fund their group medical plan. They are not for everyone; employers must do a careful examination of the captive arrangement and their risk tolerances.
To learn more about captive arrangements, contact Select Choice Benefits today!