From: Captive Insurance Times
As the traditional insurance market diverges further from the needs of healthcare systems, industry experts explain how a group medical stop-loss captive can provide the answer to stabilise costs and supply greater control
The climbing costs of healthcare, as well as the intricacies of legislative compliance following the Affordable Care Act in 2010, have caused more US employers to consider self-funding as an alternative option for their healthcare plans.
Medical stop-loss (MSL) coverage provides a layer of coverage above employer group self-funded healthcare insurance plans to protect against catastrophic specific or aggregated events.
MSL is included in US benefit plans under the Employee Retirement Income Security Act (ERISA). This means that the US Department of Labor has regulatory jurisdiction over the benefit plan itself, but does not regulate the insurance vehicle.
Healthcare systems and companies are increasingly looking to form MSL captives as a response to the traditional insurance market’s failure to evolve and adapt, particularly concerning exponential rate increases.
Joe Parrilli, senior vice president at Captive Resources, explains: “The lack of transparency in the traditional market makes it difficult for companies to gain any insight into their cost.”
“Companies are turning to group captives to find control and stabilisation of total medical spend.”
This difficult market dynamic has been shaped by the economy, the COVID-19 pandemic, legislative reform, and other circumstances such as ever-increasing pharmacy costs, notes Prabal Lakhanpal, vice president at Spring Consulting Group.
He explains that this has caused an increase in premiums, as well as greater claims volatility and higher reinsurance costs for self-insured employers.