Is a health insurance captive right for us?

| April 12, 2019

What is a Group Benefit Captive and How Does It Work?

A captive is an independently owned and operated insurance company that provides insurance to, and is controlled by, its members. A group health insurance captive is owned by multiple owners insuring just one thing – their employee health and welfare benefit plans. Because the captive insurance company insures specific risks of health and welfare claims, employers find comfort in this approach. There can be any number of employers participating in a group captive.

Typically, a company will self-insure the health and prescription drug claims and hire a Third Party Administrator (TPA) to administer the payment of claims. This company has access to all the data needed to manage the plans, view prescription usage, and help determine the best ways to improve the health of the company’s employees.

What Provider Network is used in a Captive Arrangement?

Third Party Administrators are either owned by a large health insurance company or have contracted with a carrier to use or 'rent' their network of doctors and facilities. Pick the TPA with the best network coverage in your area.

What is the Cost to the Employer? What About The Employee?

There is no more or less cost sharing in a captive than when either fully insured or self-insured. Simply determine the fully-insured “equivalent” rates and share the premium as you would in a fully-insured plan.

What Are the Protections for the Employer From Severe High Claimants?

Employers pay for all individuals’ claims up to a certain limit, such as $25,000. If an individual claim exceeds that amount, the Captive carrier would step in and pay all claims on that person up to a limit, such as $500,000. Claims above the $500,000 are covered by catastrophic insurance called reinsurance. The most an employer would be liable for is $25,000 per person covered, and the employer pays a premium into the captive for the protection between $25,000 and $500,000.

Is the Captive Premium Expensive?

The Captive premium is usually about 20% of what your premium was under your old fully-insured plan.

What are the Benefits to Participating in a Captive as Opposed to Traditional Health Insurance?

For companies that are fed up with ever-increasing health insurance costs, a captive may be a viable alternative. Captives may help companies control insurance costs, increase flexibility and avoid the annual ritual of 'renewal' with the traditional fully insured-health insurance companies.

That simple reduction in annual negotiation is priceless.

For more information on how the change to a captive could affect your health insurance costs, please contact Bryan Nelson by clicking here or by calling 800.535.0944 x 701.