As healthcare costs continue to rise, an increasing number of small and mid-sized employers are exploring alternative solutions to first dollar coverage and traditional self-funded programs. To meet this demand, Captive Resources supports several different types of Medical Stop Loss captives that are designed to:
- Address the unique needs of various employers.
- Empower companies to implement cost containment strategies by providing increased transparency into their program and cost drivers.
- Help members lower the total cost of healthcare while still providing quality coverage.
Read on to learn more about Medical Stop Loss group captives — including what’s driving the demand, how they benefit employers, and what captive solutions Captive Resources offers.
What are the Benefits of Medical Stop Loss Captives?
Below is a brief overview of some key benefits that Medical Stop Loss group captives can deliver to employers. While the list isn’t all-encompassing, it does touch on many benefits that are difficult or impossible to find with fully funded and other traditional stop-loss programs.
Increased Control
Members have the flexibility to determine the structure of their benefits plan — including setting deductibles, co-pays, and out-of-pocket maximums and selecting third-party administrators (TPA), networks, and other partners.
Greater Transparency
Members enjoy increased transparency into program details compared to fully funded employers. This allows them to see the flow of dollars, identify loss drivers, and manage claims more efficiently and effectively. As member-owners, employers also enjoy transparency into the performance of the captive, allowing them to see how much risk they’re sharing with their fellow captive owners.
Improved Health Risk Management
Group captive programs focus on helping member-companies improve the overall health and well-being of their employees and plan members. Improved health outcomes lead to a happier and more productive workforce, as well as lower claims costs.
Cost Stabilization
Group captives underwrite members based on individual performance rather than as part of a larger pool, which helps bend the renewal curve compared to the traditional stop-loss market. Other benefits contribute to more stable costs, including the opportunity to earn dividends and access to innovative health risk management strategies.
Dividend Potential
Members are eligible to recoup unused underwriting dollars (plus accrued investment income) in the form of dividends when excess losses are less than actuarially projected. Traditional stop-loss carriers typically retain these dollars as profit or use them to pay for other insureds’ medical claims.
Networking and Collaboration
Member-companies are encouraged to actively participate in the captive by regularly attending board meetings and workshops on health risk management and other relevant topics. Employers also derive significant value from collaborating with fellow members to share best practices.
What are Medical Stop Loss Group Captives?
Simply put, a group captive is an insurance company that provides insurance to and is controlled by its owners. Captive Resources developed our industry-leading member-owned group captive model four decades ago. This model has consistently proven to be an effective and rewarding solution for casualty insurance coverage. Since the early 2010s, we’ve been applying that collective experience and a similar model to help employers realize that potential for their health coverage.
Like the casualty group captives we support, the Medical Stop Loss captives we work with are also member-owned and controlled. These captives offer small- to mid-sized companies the opportunity to reap the benefits of self-funded health programs without having to assume all the risk on their own. The graphic and accompanying text below illustrate how the captive layer delivers additional transparency and control compared to a traditional stop-loss program.
Our Medical Stop Loss group captive model allows members to retain predictable (i.e., less severe) losses up to a specific deductible, which they select. Above the specific deductible layer, the captive takes on a layer of risk that’s decided by the individual captive program.
Medical Stop Loss Captive Deep Dive
Watch this video for a detailed look at how Medical Stop Loss captives can help employers control costs while still providing quality coverage for their employees.
What Medical Stop Loss Captive Solutions are Available to Employers?
The decision to join a group captive comes down to the transition from a passive buyer of stop-loss insurance as a commodity to an active owner of a reinsurance company focused on controlling total spend for the company’s health plan. However, the best way to structure that plan can vary by employer. When it comes to Medical Stop Loss group captives, one size does not fit all. That’s why Captive Resources supports several Medical Stop Loss captives to suit employers' various needs.
Regardless of the program, the Medical Stop Loss group captives we support offer the following:
- The option to keep your plan design or redesign it.
- Ability to choose the specific stop-loss limit that suits your company best.
- The option to obtain specific excess insurance that provides dividend potential.
- Access to a diverse array of exceptional wellness initiatives.
- Access to local, regional, and national PPO networks.
Risk/Reward Medical Stop Loss Captives
While the various Risk/Reward captives we support have intricacies designed to satisfy different needs, the overall structure of the programs is similar.
- Member creates plans to fit its needs.
- Member selects specific deductible levels.
- A portion of each employer’s stop-loss premium is allocated to their loss fund.
- Provision for an assessment (up to a pre-determined maximum) if a member exhausts its loss fund.
- If a member hits its cap, additional claims are protected via risk sharing with other members of the captive.
- The stop-loss carrier pays claims above the captive layer.
Pooled Medical Stop Loss Captives
This model has a lot in common with the Risk/Reward structure, but rather than using individual member performance to determine dividends, members are rewarded based on the overall performance of the captive.
- Member creates plans to fit its needs.
- Member selects specific deductible levels.
- A portion of each employer’s stop-loss premium is allocated to their loss fund, which contributes to the loss fund for the entire captive.
- If the captive doesn’t use up its entire loss fund during the policy year, each member would benefit from their portion of the profit.
- If the entire captive’s loss fund is used up and there are additional claims in the captive layer, a true-up of each member’s loss fund will be made after the policy year.
- The stop-loss carrier retains unlimited risk above the defined captive layer.