Rather than write my typical article about the cost of healthcare and what you can do about it, I thought it might be beneficial to give you a little insight into the upcoming webinar this Thursday morning at 9:00 AM MDT. I know that the some invitations don’t necessarily give you all the information needed to make a decision whether you should attend. When I get an invitation to a webinar it’s not always clear about the topic or what I can expect to learn.
Partially self-funded employers can spend hundreds of thousands of dollars every year for stop loss reinsurance. This is obviously to protect the employer from catastrophic losses that a member of their company may have during the year. The size of the specific deductible varies based upon the number of employees covered under the plan and can range from $20,000 to more than $500,000. The premium paid reflects the amount of risk the employer chooses to take.
If for example, an employer had a $100,000 specific deductible per member and paid $300,000 to the reinsurance company, then the reinsurer would expect that the claims over the $100,000 specific not exceed 65% (loss ratio ) of the $300,000 or ~$200,000. Regardless of what the actual claims over $100,000 would be, the employer is not getting a refund of the surplus – they might get a small increase in the renewal but not a refund.
A Captive is an alternative to traditional stop loss reinsurance. The main purpose of a captive is to avoid using traditional commercial insurance companies, which have volatile pricing and may not meet the specific needs of the employer. When a company creates and/or participates in a captive they are indirectly able to evaluate the risks of subsidiaries, write policies, set premiums and ultimately either return unused funds in the form of profits, or invest them for future claim payouts.
In my example above, if the group had been with the Captive and had little or no claims above the $100,000 specific deductible the majority of the $300,000 of premium that they had paid to the Captive would be returned to them.
Stop loss reinsurance can amount to roughly 15% of a groups fixed cost. A Captive is a great way to reduce that fixed cost and focus on the larger piece of the pie – claims (variable cost).
I am having Rich Ericson of Alink CIS speak about the different types of captives that you may wish to consider participating in for your upcoming renewal in 2021. Getting a return of stop loss premium sure beats giving all that money to the reinsurer each and every year!
You can REGISTER HERE. I can only accommodate 100 participants on my Zoom platform and the webinar is filling up. Again, it’s scheduled for this Thursday, August 13 at 9:00 AM MDT. Don’t miss out!
