Is a Captive or Self-Insured Health Insurance Plan Right for Your Tech Company?

In this highly competitive economy, proactive risk management is a necessity for your technology company. That’s one reason more companies are exploring their options with self-insurance and benefits captive insurance. According to the Employee Benefit Research Institute, 59 percent of private sector workers with health coverage were enrolled in self-insured plans as of 2011, in some states as high as 73%. 

What’s behind this trend? Skyrocketing healthcare costs and health insurance premiums for starters, but even more so, the trend is about employers wanting to gain transparency to one of the biggest benefits they offer their employees. Many employers – especially companies with only a few hundred employees – have gotten frustrated with insurance companies that don’t provide them with complete, aggregate level plan utilization data when presenting options for a new plan year. This makes the job of HR executives more difficult in determining how the plan is being utilized, and provides challenges to their brokers when asking for premium relief with no hard data. This lack of data is also a real contributor to the difficulty for HR execs in delivering effective wellness programs to address the main health care cost drivers.

Why captive or self-insured options?

If you have 100 or more employees and you’ve seen double-digit increases year after year with your traditional group benefits plan, it might be time to explore other options.  Contrary to popular belief, going into a self-insured (aka-stop loss plan) or captive plan (aka-captive stop loss plan) does not mean that you’re self-insuring ALL of the risk – it simply means you transfer the cost of claims at a higher layer than a traditional insurance plan (aka-fully insured plan), which transfers risk to the insurance company at the very first dollar that is spent on any particular claim.  Key advantages of these types of plans include:

• Access to anonymous employee claims data so you can gain insight into actual healthcare costs vs. the typical “trend” of insurance pooled premiums;
• The ability to customize your plan design to meet the specific healthcare needs of your workforce vs. buying a “best guess” employee needs health plan or even worse, a one-size-fits-all health insurance plan;
• The opportunity to build material incentives & disincentives and wellness initiatives that have data driven potential to mitigate key cost drivers;
• The option to contract with the providers or provider network best suited to the healthcare needs of their employees
• Creative health benefit options not normally available, like being able to take advantage of destination medicine as a cost control tool;
• Increased transparency and knowledge of health plan administration costs;
• Active engagement and better understanding of how medical usage impacts renewal premiums, allowing you to anticipate and/or reduce volatility in health insurance spending.
• The chance to cultivate a healthier workforce that embraces proactive, preventative practices

When companies enter into captive or self-insured arrangements, they often incentivize well-visits because they find many employees do not see their doctors regularly.  In many instances, there are inspiring stories of how employees discovered and were able to treat issues they did not know about, avoiding disastrous consequences they might have faced if the conditions had gone undiscovered and untreated. This process alone saves companies thousands each year, and makes true believers of the employees whose lives are touched.

The bottom line

If your tech firm has more than 100 employees, and you are looking for additional insight into actual plan utilization and actual healthcare spend, you should take a serious look at your captive and self-insurance options. Ready to learn more?

Ask your insurance provider for a stop-loss outlay at your next mid-year insurance review. Then ask the risk management experts at Heffernan Insurance Brokers to run some comparisons and outline your options for technology insurance. We have extensive experience with captive and self-insured programs and we welcome the opportunity to help you manage your risk and protect your bottom line.