Smart Benefits: Should You Consider A Captive for Your Health Benefits?

Monday, December 30, 2019

Rob Calise, GoLocalWorcester Business/Health Expert

Rob Calise

If you’re a small to midsize employer looking for greater control over benefit costs and plan design, it may be time to get creative and consider captive insurance. While originally used primarily to insure property and casualty risks, employers of all sizes are now writing ERISA-covered benefits such as medical insurance into a captive. And they offer several important advantages for employers.

Captive Benefits

With a captive insurance company, companies typically are in the same or similar industries and often are likeminded in terms of plan designs and healthcare management. Working towards the same goal, a captive can offer several advantages to employers.

Gain Greater Flexibility: Employers in the captive have more flexibility in benefit choices and plan design than traditional commercial insurance affords and don’t have to worry about state-mandated benefits so they can customize coverage.
Save on Fees: With medical captives, members can leverage their combined purchasing power to save on administrative costs and also avoid healthcare reform and premium fees and have lower premium taxes.
Lower Risk: A captive gives members transparency to arm them with the information they need to adopt a strategy for proactive health risk and disease management and empower employees to lead healthier lives to lower their risks.
Earn Investment Income: The members share in any claims surplus and can invest the underwriting profits to benefit directly from the investment income rather than an outside company reaping the reward.

Considerations

Before joining a specific captive, take the following considerations into account:

Owner: Who is the beneficiary owner? Are you a captive owner or are you a participant only?
Fees: What will the admin and captive fees be? Establishing a captive will incur its own fees for things like legal, accounting and actuarial services.
Management and Transparency: Can you follow the money? Are you allowed to vote for a change in vendor?
Board Structure: Who will sit on the advisory board for the captive? Can you?
Ability to Match Plans and Network: Do you have to change your plan design? Your network?
Financial Stability: Take a hard look at the ROI and the ongoing financial statements.
Program Structure: How is claims risk divided? What is the reinsurance structure?
Program History: Has the captive proven it can withstand bad years? How long has it been around?

Rob Calise is the Managing Director, Employee Benefits of The Hilb Group of New England, where he helps clients control the costs of employee benefits by focusing on consumer-driven strategies and on how to best utilize the tax savings tools the government provides. Rob serves as Chairman of the Board of United Benefit Advisors, and is a board member of the Blue Cross & Blue Shield of RI Broker Advisory Board, United HealthCare of New England Broker Advisory Board and Rhode Island Business Healthcare Advisors Council. He is also a member of the National Association of Health Underwriters (NAHU), American Health Insurance Association (AHIA) and the Employers Council on Flexible Compensation (ECFC), as well as various human resource associations. Rob is a graduate of Bryant University with a BS in Finance