The goal for most captive insurance companies is to promote progressive thinking. Companies have the option to be less dependent on insurance providers. Captive insurance frees employers from insurance plans that put them at risk.
Captive insurance may be better than traditional insurance for many businesses. Employers who are afforded the opportunity to self-fund their plan should consider captives. Find out five things captive insurance companies can do for your business here.
Spreading the Risk
Captive insurance helps members take advantage of health insurers’ economies of scale. Carriers providing full insurance pool mid-sized companies together. And as the pool size increases, insurance plans become more profitable.
As pool sizes increase, claims predictability increases and volatility decreases. The same applies when multiple employers come together to further spread the risk.
Earn a Greater Profit
A successful captive insurance program wouldn’t be in business without showing a profit. Hence why premiums collected by stop-loss carriers can outpace the claims they pay. They can take on the risk because of the economies of scale.
Since captive insurance companies take advantage of the same process, they also benefit from sharing the risk. Captives focus on their shared claims to prevent loss premiums. The captive insurance program keeps the paid premiums and has captive members share in premiums that aren’t used to pay claims.
Stay Flexible and Prevent Loss Deductibles
Companies made of less than 100 employers could still want a deductible different than an employer with 300 employees. Captive insurance members may still participate in the same captives to take advantage of critical mass. The stop-loss deductibles of captives can differ based on the risk they want to assume.
Captive insurance companies help employers maintain control. Staying flexible will also likely stop-loss deductibles. Each employer can choose their own third-party administrator, plan design and pharmacy benefit manager.
Reduce Renewal Volatility
Upon renewal, the captive shares risk under catastrophic claims. The stop-loss carrier underwrites the renewal based on these claims. In result, the objective is for more consistent stop-loss renewals in the long-term.
Many of those potential $200,000 claims may come with a laser from the stop-loss carrier. With captive insurance companies, members share those higher-cost claims. Captives struggling to obtain stop-loss coverage at good rates can self-insure instead.
Full Insurance vs. Self-Insurance
Moving to captive insurance companies gives employers the advantages of self-insured health plans. Captive insurance also helps employers avoid the drawbacks of being fully insured.
Fully insured plans have state premium taxes that range between two to five percent, depending on the state. Insurance companies also add up to three percent onto premiums for profit margin. Fully insured plans may also limit claims reporting depending on the company size.
If you have one bad renewal, you could pay the price for years. Renewal after a high renewal increase is the new starting point for being fully insured. Yet, with a self-insured plan, the majority of costs come from claims paid and renews each year.
Joining Captive Insurance Companies Today
Do you think a health plan captive is right for your business? If your focus is on proactive management, captive insurance is a great step to taking control. Learn more about what your options are and contact captive insurance companies today!
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