Captives Can Make Self-Insurance Work Better

A captive gives several employers a vehicle they can use to band together to fund all of the sponsors’ health care costs.

A captive can provide all the benefits of self-funding, but with additional protection against catastrophic costs, because the captive covers many more people than any single small employer does.

An employer in a captive also can

• Buy stop-loss insurance to further protect against big claims, just as it could if it were sponsoring a traditional self-insured plan. This add-on insurance can cover any health care costs above pre-set dollar amount, or attachment point.
• Tailor its coverage to meet the needs of its employees, just as it could if it were sponsoring a traditional self-insured plan.
• Get the kind of claims data it needs to create successful wellness and condition management programs, just as it could if it were sponsoring a traditional self-insured plan.

One risk associated with traditional self-funding arrangements is “lasering,” or the possibility that a stop-loss insurer will refuse to cover some employees or dependents with high medical bills. A health captive may be able to protect the participating employers against stop-loss lasers.

— Read Understanding and Positioning Captive Insurance Arrangements on ThinkAdvisor.

Seth Denson (Photo: Denson)

Seth Denson is the principal and co-founder at GDP Advisors.

Anthony Evans (Photo: Evans)

Anthony Evans is the President of Business Development at Henry Investment Group.