How Captives Work

Captives offer a different approach to healthcare benefits. Employers looking for control, transparency and cost savings often find the perfect fit with a medical captive.

Captives insurance is simply another form of self-insurance that has found significant appeal as an alternative funding strategy to traditional health insurance. In traditional insurance you pay a fixed premium and the insurance company assumes the risk of medical claims from the employee benefit plan.

That means if your plan performs better than expected, your carrier pockets the profits, but if it performs worse, you see sky-rocketing double-digit increases. In self-insurance, employers assume a portion of the claim cost by paying for a share of each claim as they are incurred. In exchange, the employer improves its cash flow, claim information received and control over the plan. It’s a misconception that only large corporations are candidates for self-insurance.

BlueStone Advisors will show you how captives make self-insurance work for even small and mid-size employers.

Fundamentals of Captives

Understanding Captives

For years, large companies have used self-insurance strategies to reduce insurance costs, lower their risk, and optimize tax savings. Thanks to BlueStone Advisors’ captive management services and access to best in class group captive programs, these benefits are now available to agencies, middle market companies, and groups & associations.

An organization can realize many benefits by using a captive but each one comes down to a greater degree of control. When you establish your group in a captive, YOU control costs, YOU control cash flow, YOU control claims, and YOU control risk.

With a captive you have the freedom to:

Pool risk with other employers in your captive
Pay amounts you determine by writing the policies and setting premium
Deduct premium payments from your taxes
Collect payments and invest them for future claim payouts
Influence insurance coverage including claims handling procedures
Profit from improved claim performance, unused funds are paid to the owner of the captive – YOU!

Choosing Captives

There’s no one-size-fits-all solution for captives. There are many types of programs, each structured differently. That’s why it’s important to find a partner, like BlueStone Advisors, who can guide you through all your options to find the right fit. BlueStone Advisors will help you understand if captive insurance is a good match. If it is not, we will be the first to let you know AND then engage our best in class client advocacy team to work with you and the traditional direct markets to mitigate costs and provide the optimum strategic outcome. If a captive is the right fit, our professionals will help educate you on which structure and program works best for your specific industry and group size.

Captives FAQs

General

What is a captive insurance company?

What is a Group Captive?

What is the key difference between a market insurance program and a captive insurance program?

Is a captive program the same as a Multiple Employer Welfare Arrangement (MEWA)?

What entity issues the insurance policy?

What does it mean to participate in risk?

How does an Insured participate in the risk?

Risk

What does the captive cover?

What is the exposure for a participant?

Why take the risk?

The group captive provides the same policy form coverage as the standard market and offers the following benefits:

Potential sharing of underwriting profits and investment income.
Reduction of insurance cost.
Stabilization of unpredictable and cyclical insurance market.
Transparency of claims and dollar spend.
Control over provider’s and plan design.
Partnership with carrier and participants who share a loss prevention philosophy
The ability to better manage and in most years retain the majority of “profit” that is otherwise being pocketed by the insurance company under a fully insured relationship.

How is the Captive protected from catastrophic loss?

The captive program includes the protection of reinsurance agreements that limit any catastrophic or aggregation of risks. The program’s reinsurance structure limits the participant’s maximum loss and means the participant will never be required to fund more than its premium and collateral. The carrier assumes the program risks above the aggregate and specific occurrence attachment points.

Pricing & Expenses

What are the charges associated with this program?

Collateral

What is collateral?

Why is collateral required?

What do I get for my collateral investment?

How We Help

Change Your Approach Purposeful Incentive Strategy Transparency Control Cost Savings

Change Your Approach

Managing healthcare expenses is no longer a once a year conversation for employers. Healthcare and employee benefits have become a top three line-item expense (most often number 2 behind payroll) having significant impact on recruiting and retaining top talent, as well as the company’s long-term profitability.

BlueStone Advisors offers a proven solution for employers to gain control of health benefit costs by providing a funding strategy, until recently only available to large fortune 500 firms.

If you’re like a lot of mid-size employers, your healthcare expense is likely outpacing your revenue growth. This impacts not only your bottom-line but your ability to compete long-term. BlueStone Advisors can help you manage your employee benefit costs by applying a straight-forward approach to purchasing healthcare.

Purposeful Incentive Strategy

Employee benefits are part of your total compensation program. Why not view your health plan as part of an overall purposeful incentive strategy? BlueStone Advisors helps employers see healthcare insurance with a fresh perspective. Our approach offers an opportunity to:

Receive accurate, consistent and complete data transparency
Conduct root cause analysis of cost drivers and control their remediation
Stabilize cost
Retain profit from better plan performance

Our detailed explanation of how captives work identifies how you’ll maximize savings and enhance your company’s earning potential.

Transparency

Healthcare insurance impacts not only your company’s bottom line, but your employees’ health and well-being. That’s why you deserve the complete picture, based on as much information as possible, to identify and prevent these costs from rising. Your traditional fully-insured plan limits your access to the data and reporting you need to make informed decisions. Participating in a captive is different, your information is given to and belongs to you.

Information is an empowering tool. It’s difficult if not impossible to fix a problem when you have no access to information about what may be creating an increase in expenses. Transparency allows employers need to guide their decision-making, such as:

Access to all your data
Visibility into what’s driving your costs
Clarity on how and where your money is being spent

With a captive healthcare solution your company receives full transparency, which means you can start to curtail expenses, adjust your response to cost drivers, act on your own behalf in controlling costs, as well as proactively manage the health and well-being of your employees.

Control

Information leads to empowerment. Once you have access to your data, you can begin making proactive changes with the goal of cost containment, as well as improving your employees’ health and wellness. Control, however, means much more than deciding on one or two plan-designs and employee contributions, like in a traditional insurance arrangement.

With captive participation, you control provider networks, pharmacy options, disease management, wellness incentives, claim’s management and the next response to a runaway cost.

The economic and regulatory landscape has been forcing change in the healthcare industry. The political aspect of healthcare is out of your control, but the power to control your benefit plan and contain costs is not. Your success depends on taking control. Participation in a captive offers control by removing the limitations of traditional insurance and delivers protection against volatile premium hikes.

Control means you’re in charge. With traditional insurance carriers, your control begins and ends at selecting from a limited set of plan designs and paying your premium. Within a captive, you may start with the off-the-shelf employee benefit plans, but you have the power to add or customize critical health plan strategies. You are empowered to direct crucial aspects of your benefit plan, including:

Choose your claim advocate and/or network of health care providers
Select your preferred cost containment solutions
Review your benefit plan reporting and adjust plan design with the information

Cost Savings

Employee benefit costs continue to grow, and often at a faster rate than revenue or inflation, putting a strain on your business. If you’re pursuing a better deal with a different carrier every year, you’re at the mercy of a market that has seen costs double every four years. You may have considered alternative funding strategies in the past but were deterred by the risk of self-insuring your own claims.

Funding your healthcare with a fixed premium like in a traditional fully-insured plan assumes a certain level of utilization from the plan participants. If the plan performs better than expected, you’re still likely going to end up shopping for a better deal with a new carrier.

Why not be rewarded for doing something good and keep your cost savings in your own pocket? Why give it away to the traditional insurance market? The best way to beat rising medical benefit costs is to keep the savings when you have them.