Captive Health insurance OVerview
A Basic understanding of the plan
Below you find a brief walk-through on how the plan functions to improve your business.
Regular PPO models
Traditional Self Funded Info
In a typical self-‐funded plan, the reinsurance cost can represent a significant portion of the overall plan’s cost, or it can be a relatively small portion of the overall plan’s cost. There are a number of factors which determine how much of the stop loss premium is attributable to the overall cost of the plan. The first is the size of the employer group itself and the second and more important element is the size of the individual Specific Deductible the group is comfortable assuming. Exhibit 1.1, illustrates the cost and transfer of Specific deductible risk in a self-‐funded group with approximately 100 employee lives.
Generally speaking the larger the employer group size, the higher retention limit they can afford from a cashflow perspective, so 200 employees would not necessarily be $600k in premium. The account with 200 employee lives could assume a higher retention limit on a specific individual claimant basis, thereby reducing the fixed cost premium as a result.
How Our Plan Functions
Group Captive Layers
As stated earlier, the underlying aggregate protection, by individual group, is transferred to the fronting carrier, and 100% of the aggregate premium and risk exposure resides with the carrier. (Exhibit 1.3 Red layer agg exposure)
The $100,000.00 captive layer, is floating above the individual group’s Specific deductible, highlighted in Exhibit 1.3 as the green layer. The purple layer, titled “Reins. ULM” stands for reinsurance coverage from the captive attachment point, and goes up to unlimited lifetime maximum, per PPACA federal healthcare reform guidelines.
The Captive loss fund layer’s exposure is capped at 125% of the expected claims which occur in the captive loss fund layer. Premium is charged to the captive for this exposure, however, the risk of this particular loss is born by the fronting carrier/reinsurance carrier.
Paying Claims in your Cell Captive
A company of this size would most definitely need an aggregate protection policy, for those claims from dollar one, up to the $25,000.00 deductible. The aggregate exposure is generally capped at 125% of “Expected claims” from $0.01 to $25,000.00, however, this “Corridor” can be reduced to 120% or 115% of “Expected” in some cases, which is carrier driven as to how compressed they will allow the corridor to become. And as one would guess, as the Aggregate corridor becomes compressed, the aggregate premium/costs go up proportionately. In this particular program, the fronting carrier(s) are required to assume 100% of the aggregate policy risk, therefore this program is a “Specific Deductible Only Captive.”
This program is a “Specific Deductible Only Captive” with the risk facility residing in a Captive in North Carolina (Vault), the breakdown of dollars and risk on an individual group client basis is illustrated in Exhibit 1.2.