Distinguishing Captives

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Distinguishing Medical Stop Loss Captives

The following table describes the distinctions between the standard insurance market and medical stop loss captive insurance.

Description Captive Insurance Companies Traditional Insurance Companies
Costs and Expenses Greater transparency into the flow of dollars and loss drivers. Premium calculated based on group’s own experience and performance. Lack of transparency into how traditional insurance companies calculate premiums. Operating costs are generally not disclosed and premiums are based on industry data.
Investments Captive invests loss funds and any investment income is maintained for the benefit of captive owners. Insurance company retains all investment income.
Cost Stabilization Captive owners fund their own predictable losses while reinsuring catastrophic exposures, and premiums can be stabilized through loss control. Premiums increase and decrease based on insurance cycles, not individual’s loss experience.
Risk Profiles Well Health Insurance Ltd. requires 2-3 years of detailed claim information; claims are reviewed up front to determine whether the group is a good fit. Insurance company selects only those classes of risk that conform to its "standards" without providing insight to other groups within the pool as to what those standards are or how individual group information is reviewed.
Choosing Services Captive owners help determine which services will be available as options, promoting cost effectiveness for the captive. Each member can choose their third-party administrator, network and plan design. The standard market avoids providing individual services on a fee basis.
Choosing Coverages Coverages can be tailored to the specific needs of the captive owners. Fewer coverage variety and options.
Claims Greater control of overall claims expenditures through organic networking with like-minded businesses. Traditional insurance programs do not provide networking opportunities or initiatives to help groups determine the best long-term approach for controlling claims expenditures.