Why Captive Insurance Programs Mean Freedom of Choice

Captives Freedom of Choice

Do you know if your company’s health benefits plan is fully insured or self-funded? Many people don’t. There are several ways a company can manage their plan, and it makes a difference.

Fully Insured vs. Self-Funded Health Plans

Fully insured health care plans are most commonly used by employers with fewer than 1,000 employees. A fully insured plan means that an employer pays a fixed premium every year, regardless of the number of claims. Often, annual claims are less than the premium paid, but the carrier keeps the total amount.

This means there is no reward for having a healthy workforce whose claims fall below the annual premium. As an employer, you either use it or lose it and any savings are retained by the insurance carrier.  This, coupled with year-over-year rising costs, is why fully insured programs are not always an ideal option for employers trying to offer affordable health benefits without passing along the increases to their employees.

Traditionally, larger employers have the option to go with self-funded health plans. In this case, the employer takes on the risk of paying all the claims and relies on a stop loss carrier to handle any catastrophic claims that may occur. However, self-funding means the employer pays for only claims incurred and not a set premium that often exceeds actual costs.

Self-funded health plans enable an employer to take control of spending through transparency in claims data to help identify cost savings opportunities. The advantage of actively managing spend to employ cost containment strategies far outweighs the risk.  Plus, employees are provided a quality level of care typically at a lower cost—promoting the attraction and retention of top talent.  Self-funding is widely recognized as the most efficient funding method available for health care benefits.

Group, Self-Funded Health Plans

In its simplest form, a group, self-funded health plan is when employers pool together their risk into a captive program.  The word “captive” is positive in this context and provides freedom of choice.  Each employer maintains their own individual health plan based on their specific needs, but pooling and risk sharing removes volatility.  These employers would otherwise be too small to self-insure their employee health care benefits on their own and would be subject to high premiums found in the traditional, fully insured market.  Employers with as little as 50 employees can participate in a group health captive – often with savings of 12% – 20% over their fully-funded renewal.  Further, employers are given flexibility in plan design and ways to save with little-to-no disruption to their employees.

Buying health insurance should not be a rash decision made each year but rather a well-thought-out strategic plan to manage this significant expense. Nearly 7 years ago, Clark & Lavey developed InCap®, our proprietary solution to controlling and reducing health care premiums.  This has provided participants a greater return on savings over the long term – $36M in premium savings alone with distributions and PBM rebates of more than $2M. Want to know more? Contact us!