8 Reasons a Group Benefit Captive May be Right for Your Organization
Before I jump into why you may want to consider a group benefit captive arrangement, I’d like to describe what a group benefits captive is and how it works.
In short, a group benefit captive, which is a relatively new concept in the employee benefits world, is an insurance company in which employers, often with 100 or less employees, come together to make up the insurance company and pool, and share, risk to create a more stable, and predictable, health care funding arrangement.
A group benefit captive is similar to traditional self insurance, which has stop loss insurance to cover catastrophic claims, except that the captive provides a middle layer of coverage between the employer’s claims and catastrophic stop loss claims. This layer is where the risk is shared among member employers and acts as a shock absorber for individual members so that an individual bad year is buffered by the pool, just as the results of an individual good year in a captive wouldn’t be quite as good for a member on its own.
The benefit of a captive arrangement for members is that, over time, a group captive provides a more stable environment for predicting health care costs. All employers are going to have that “bad” claims year and the idea of a group captive is to share that risk so that cash flow and planning are more predictable. In return, the captive members give up a slice of the reward of having a good year. Think of the risk in terms of gentle rolling hills rather than the steep up and down of mountain ranges.
Benefit captives come in many shapes and sizes – some are based on industry and some are not. Some are dividend eligible and some are not. Some are run by outside insurance companies and some are independent of any individual insurance carrier. Some cover hundreds of thousands of employees and some barely crack a thousand.
Whatever the form, the intent of group captives is to create a more stable health care funding arrangement for those that join. In essence, employers who join a group captive believe that they are better off together than going it alone on a fully-insured basis or a traditional self-insured basis. They can be particularly attractive for smaller employers who want the opportunity to enjoy the benefits of self-funding without high risk.
Click next to see the eight reason a captive might be right for you...
With that said, the eight reasons a group benefit captive might be right for you:
- You’re fully insured and sick of crossing your fingers at renewal time.
- You want more flexibility in how you design your health plan.
- You like the idea of self-funding and the accompanying benefits, but are worried about the risk of doing it on your own.
- You want to avoid mandated fees of health care reform.
- You like the idea of sharing best practices and purchasing power with other like-minded employers.
- You want access to claims data for decision-making.
- You want to take a more active role in trying to contain health care costs for your organization.
- You’d rather have profits returned to you than go to an insurance company.
If some, or all, of these points resonate with you it might be time to investigate a group benefits captive for your organization.