As health insurance costs continue to escalate and uncertainty in the marketplace persists, self-funded stop-loss captives offer a cost-effective method for employers to better manage their group health insurance plans. In the past, self-funding was only a viable funding alternative for larger employers. Now, group captives have also made self-funding attractive to smaller organizations with as few as 25 covered employees.
A group captive is an insurance arrangement that insulates self-funded employers from adverse market renewals by sharing risk with other employers of similar size and risk profile. Employers that perform well financially are rewarded and those that do not perform as well are protected.
Self-Funding Turns Fixed Costs into Variable Costs
Whether fully-insured or self-funded, cost components in a group health plan are the same, comprised of administrative fees, risk premium and claims. All fully-insured plan costs are fixed and 100% of the risk is transferred to a commercial insurance company. In a self-funded plan, the employer assumes some of the risk, significantly reducing fixed cost. This allows more of the
total health insurance spend to fund claims, if and when they occur. Premium surpluses (profit) are retained by a self-funded employer rather than by an insurance carrier.
To read more on self-funded stop-loss captives, download the complete Whitepaper below:
About the Author:
Kurt has almost 30 years of experience in employee benefits working with plan sponsors on strategic initiatives involving all aspects of health insurance and health risk management. He is currently responsible for leading the Independent Schools Benefit Consortium (ISBC). Kurt holds a bachelor’s degree from the University of Wisconsin-LaCrosse and is a designated Registered Health Underwriter. Connect with Kurt on LinkedIn.