Is there a way to save money from insurance? Will taking a risk end up saving money in the long run? We recently interviewed Don McCully from Medical Captive Underwriters, and he has a goal to have captive underwriting be as transparent as possible. When it comes to captive underwriting, Don knows that there are risks that need to be measured out when proposing new plans, and sometimes they are risks that employers don’t want to take. That is, until they realize the potential of what they could be saving.
What Is Captive Underwriting? And What Are the Benefits and Goals?Self-funding has been attractive to a majority of employers. Until the affordable care act was passed, no one looked at solutions other than straight self-funding, a benefit for larger employers who are credible by the underwriters. What captive underwriting wants to do, is allow them to do it more efficiently and more comfortably when it comes to the amount of risk. Instead of paying 100% insured carrier, there is a tool to gain control of what their spend is and what it’s made up of. The goal is to provide transparency and control, be independent. Use the law of large numbers, a basic tentative insurance to smooth employers renewals and provide lowest overall cost. “Rather than pay the full insured carrier,” says Don, “we want them to assume a little bit of risk, share a little bit of risk and then transfer the catastrophic risk to the carrier.” Captives consist of the employer taking on a portion of the risk, pooling in the middle portion and the other part goes to reinsurance. Assume=employer. Share=captive. Transfer=reinsurance entity.
Understanding Fully Insured PlansWhen there is a company that is spending x amount of money for y amount of employees, any time there is a year that the employee doesn’t make a claim even though they assume about 60% of the liability, that is income saved on the carrier’s balance. There is no data plan that is presented when it comes to increasing the price point due to risk. At Medical Captive Underwriting, there are tools that will help monitor the data and the risk factors to come up with a fair and transparent plan. Carriers will try to “forgive” the claim, when in fact they draw from the other employees that didn’t make a claim at all. That pooling charge doesn’t let you figure out how you’re spending money. If you look at your renewals, there is a way to look at that to see if your risk is in line with the market or if you’re an outlier one year or every year. From looking at that we can back into the knowledge we have to see if the carrier was fair to the employer.
What Is Level Funding?
When it comes to level funding, what you’re paying is all your pre-funding and some of your catastrophic claims. “In some respects, I believe it’s a bait and switch [carrier model] low teaser rate,” says Don. Still underwritten in the same pull and share platform, there is still the ability for the carrier to control the plan design/ cost shifting. Level funding is a way for employers to budget, accessing the program, where employers use the four-tier carrier for the first year. That lets them overfund as expected, where 60% is going to be a variable cost. That’s money that stays in their control. Rather them cut a check to pay claims, they level funded with administrator and they get money back directly. Level funding offers transparency, control, and a budget mechanism for the employer.
This can all be done with Medical Captive Underwriting. To get in touch with Don, email him at Don@MedicalCaptive.com or reach out on LinkedIn. This blog post is based off a podcast interview with Don McCully. To hear this episode, and many more like it, you can subscribe to Healthcare Simplified.