Health insurance costs are rising yearly, creating significant challenges for individuals and employers who provide health coverage to their workers. With no control over where health insurance costs will go in the future, employers are turning to alternative options to keep these expenses lower.
Two major alternative options today are health insurance captives and consortiums. These plans provide new ways employers can fund their health insurance plans to help offset high costs. Let’s learn about these two alternatives below.
How Does It Work?
Captives and consortiums group together small to medium-sized employers (which have between 25 and 500 employees) to allow them to manage their healthcare costs. They enable employers to self-fund their plans without many of the traditional risks of doing so.
The costs and risks of self-funding are distributed among all the group members. In essence, if a catastrophic claim is filed on the plan, the risk is distributed, making the overall risk much lower.
While the costs and risks are shared, each individual employer can choose their own provider network and claims administrator. By doing so, it dramatically increases the buying power of employers, which in turn reduces their costs.
The Differences Between Captives and Consortiums
Captive health insurance allows group members to operate and own their health plan; this enables them to share the risk with other companies similar to them regarding size and risks. By doing this, employers can pass on the plan’s savings costs to those insured by it.
Consortium health insurance allows employers to team together to provide health insurance coverage; it enables them to save on administrative costs since they are spread among all the member organizations. It also allows them to get more discounts.
The Benefits of Captives and Consortiums
There are many reasons why captives and consortiums are the fastest-growing trends in employer-sponsored health insurance plans. Some of these benefits include the following:
- Premium savings of 10% to 15% compared to traditional markets because of the buying power and risk-sharing
- Stable renewals, with 98% of employers renewing each year, according to a Benecon study group of 1,100 employers since 2001
- The ability to choose any medical network, such as Aetna, United, CIGNA, and Blue Cross Blue Shield
- The ability to choose any claims administrator, such as Boone Chapman, PAI, and Allied
- The fact that all unused premiums are returned, with about half of all employers receiving a surplus payment each year
- Complete cost transparency, as employers can see exactly where their money is spent
- Guaranteed renewals with no exclusions, as renewals aren’t based on the group’s individual stop-loss claims
- Flexible plans that allow you to design your own
- Level funding, with premiums being the same each month
- No long-term commitment, as employers have the option to renew or not each year
How These Plans Save Money
There are certainly differences between captives and consortiums, but the savings they provide are relatively similar. As a result, both of these plans can provide employers with significant cost savings while providing significantly improved benefits.
These plans can provide cost savings by having their members focus on managing their risk. All money for the claims filed with the plan comes directly from an employer’s pocket, giving the employer more control over limiting all the risks — combined with the other employer members.
Just like all other self-funded health insurance plans, members of a captive or consortium will eliminate their exposure to premium fees from the state and federal government, as well as taxes that are associated with health insurance plans that are fully funded. In addition, this allows employers to save money and pass on some of those savings to their employees.
In an uber-competitive job market, offering employees an affordable health insurance plan could be a significant differentiating factor for businesses in recruiting. This is one added benefit of joining a health insurance captive or consortium.
Discover Your Options with Beckham Insurance Group
There are many benefits that a health insurance captive or consortium can provide to small and medium-sized businesses. A handful of benefits are listed above, but many more could apply to your business.
Interested in learning more? If you’re in the South Carolina or Georgia area, contact our team at Beckham Insurance Group for a free proposal. Our experienced professionals have the knowledge and experience to provide you with the information and coverage you need to help you lower your health insurance costs while increasing your level of service.
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