Medical Stop Loss Captives

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:

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’s Driving the Demand for Medical Stop Loss?

The average employer costs for family premiums have more than tripled in the last two decades, but health insurance remains an essential benefit for attracting and retaining talent. Download the infographic to learn why it’s a great time to explore Medical Stop Loss captives.

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.

Medical Stop Loss Captives-Group Captive vs. Traditional Stop Loss

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.

Medical Stop Loss Group Captives Video-Thumbnail

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:

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.

Medical Stop Loss Captives-Risk Reward Structure
  1. Member creates plans to fit its needs.
  2. Member selects specific deductible levels.
  3. A portion of each employer’s stop-loss premium is allocated to their loss fund.
  4. Provision for an assessment (up to a pre-determined maximum) if a member exhausts its loss fund.
  5. If a member hits its cap, additional claims are protected via risk sharing with other members of the captive.
  6. 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.

Medical Stop Loss Captives-Pooled Structure
  1. Member creates plans to fit its needs.
  2. Member selects specific deductible levels.
  3. 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.
  4. 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.
  5. 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.
  6. The stop-loss carrier retains unlimited risk above the defined captive layer.