Captive Group Health Insurance Questions
(This came to me from an HR Director of a mid-size company - Steve)
We've been looking into Captive Groups for our health insurance benefits. We have been self-insured for many years, and we're always looking at what's out on the market. I've done the research on what Captives offer, but I'd love to hear from other companies who have put them in place.
If you participate in a Captive Group, would you please list the pros and cons you've experienced? We're heading into our mid-year strategy cycle with our broker, and I'd like to have some real-world cases to share/discuss with them.
Thanks!
2 replies
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Full disclosure, I am a broker, who has used used captives for a few of my clients. In my experience, captives are good choices for a smaller organization that has consistent claim issues resulting in larger than normal stop-loss renewals. As part of a captive, you will be pooled with many other organizations so that your experience is combined with the group. Even if you have poor claims results, their will be a weighting, but you will likely moderate the large renewals that you may have experienced in the past or expect to have in the future.
The key is to participate in a sound captive, one that has sufficient assets and healthy participants so that you don't participate in a pool of "sick" organizations. Does the captive require members to participate in activities to prevent or avoid claim activity, such as wellness programs, pharmacy alternatives and disease management.
The other concern is the "buy-in". Some captives have a two year buy-in for about 10% of the stop-loss premium. Other captives may require and annual fee. Some captives pay a dividend to its members based on the pool's financial experience. It is also important to understand the termination ability. If you find that the captive is not the most favorable, can you leave and do you get refunded your buy-in or annual fees.
I hope this was helpful. I am happy to share more experience if needed. If so, you can reply to this site and I can get in touch if you prefer.
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Hi. We moved from full-insured to a Captive a few years ago. I think many of the pros and cons are covered in what Steve has in his response. The captive that we participate in is very transparent with all its members on what is required to be in the captive and the financial story-shares how each company is running as well as the overall captive.
I do find many of the benefits are similar to self-insured but with the added layer of the captive to help ride the waves of the high claim years. We are a mid-size company as well. I am happy to discuss separately as well.