Many employers are faced with the rapidly growing cost of health insurance, second only to payroll. The average cost for family coverage is almost $13,000 a year. Larger employers are capable of taking control of their costs because most of them are self insured. Most mid-sized employers are fully insured and do not have the product options that their larger counterparts have available. They do not know what claims they have or where their premium dollars go. The lack of transparency prevents them from taking control of the cost of health insurance.
So how can mid-sized employers change what they are doing? They can form what is called a captive program. A captive can be formed by a group of employers in an effort to reduce the costs associated with providing health benefits to their employees. These employers can come from a wide variety of backgrounds including existing risk retention groups, trade associations, franchises, portfolio companion of private equity firms, and clients of an agency or broker. Employers have been using captive programs for workers compensation for years with high success.
Each captive can be customized with its own terms, rules of participation, and financial structure, and the typical captive program takes 3 - 6 months to create depending on multiple variables. Launching a captive usually requires a minimum of 3 employers with a total of 500 or more employees.
So what is the value of being in a captive? The concept behind a captive program is simple: provide medium sized employers with the advantages of self insurance while decreasing volatility. Participation in a captive program is a means to an end. The real objectives are transparency, control, stability, and profit. A captive program can help achieve these objectives.
For more information about Captive Programs, please contact us!