Your business relies upon a long-term strategic plan to survive and thrive. Long-term insurance planning is important, including making sure that employee benefits dovetail with payroll and increasing control over large operating expenses that drive profitability.
Myth:
“Captive” solutions are only for property and casualty insurance.
Facts:
Benefits stop-loss captives, consortiums and partially self-funded platforms can serve as a powerful tool to protect companies from year-over-year volatility and to help fully insured companies gain better control and consistency with costs. Self-funded benefits are a great fit for a growing number of mid-sized companies.
Benefits stop-loss captives, consortium and partially self-funded platforms provide undeniable cost savings and control, and, are extremely simple to implement. Health care costs continue to chart a staggering upward trajectory. According to the Milliman Medical Index, a family of four in the U.S. spends an average of approximately $28,166 per year on health care and prescriptions, up significantly from $23,215 in 2014. Employers continue to subsidize employees’ health care costs paying an average of 56 percent of the total bill. As health care premiums rise, the burden intensifies, and, companies search for ways to contain these expenses.
Until now, there have been few financially feasible methods for mid-sized companies to self-insure and bear risk. Benefits stop-loss captives, consortium and partially self-funded programs allow employers to band together to purchase and manage their stop-loss risk. This added security can give mid-sized companies control, innovation and transparency enjoyed by most large employer groups. They will also help keep employee health care costs down and more consistent year over year.
Myth:
Insurance captives, consortium and self-funded platforms are far too complex for my mid-sized business.
Facts:
Innovative self-funded benefit platforms give small- to mid-sized employers a way to control the cost of employee benefits. When employer claims are extensive, a group captive absorbs the shock. When employer claims are modest, your plan benefits by capturing the underwriting profit that would normally go to an insurance carrier.
For years insurance brokers have been operating under the radar while their interest have been unfairly aligned with health insurance companies. Your objectives to mitigate costs increases and proactively manage health risk may have taken a back seat to the carrier/broker partnership focused on profit and control. A fully insured employer is worth two to four times the operating profit of a self-funded employer. All fully insured employers lack control over their medical plan data, a major disservice, and another way insurers restrict your ability to be proactive.
Myth:
The pain of change from a fully insured program to a self-funded platform is too great. My employees and staff cannot handle this right now.
Facts:
Adding a captive to an existing self-insured structure or switching from a fully insured structure is simple and straightforward. In most cases, employers can keep their third-party administrator (TPA), network, and plan design(s). The biggest change an employer should notice is full transparency into claims and cost containment solutions available to bring down costs.
The self-funded world is dominated by consultants who are a trusted, valuable extension of your business. They are there to advocate, explain, negotiate, and care about duration and continuity. By making the leap, employers remove themselves from the year-to-year volatility and can develop a strategic plan that provides long-term stability and eases the pain of change.
Myth:
With COVID and the massive disruption, our company can’t afford another disruption and risk employees’ find out we are changing plans.
Facts:
Implementing a benefits stop-loss captive is typically a smooth transition for administrators. But, it is an even smoother transition for employees, who most likely won’t notice any change.
In a typical self-funded platform, employers (via their consultant) contract with a TPA that handles all of the day-to-day logistics of the plan, including adjusting claims, providing ID cards, and providing both employer and employee customer service. In most cases there is no change to the network of doctors and hospitals the employees see today. In fact, many times employees have no idea their employer moved to a captive until they notice their premiums are stable.