Rough Notes Magazine July 2013 - page 70

70
ROUGH NOTES
By Michael J. Moody, MBA, ARM
A
sk any employer about the biggest challenges
they are facing, and the cost of employee
health coverage is likely to be high on their
list. Given the continued cost pressures in
the health insurance field and the uncertainty surround-
ing the implementation of the 2010 Affordable Care Act
(ACA), that’s not too surprising. Corporations are struggling
to determine the most cost-effective approach to maintain
their employee benefit programs. While this is an issue
for all organizations, it is particularly acute for mid-sized
employers, since they have fewer alternatives to choose
from and, typically, the least amount of information to make
an educated decision.
Historically, large employers have been able to avail
themselves of the advantages associated with self-funding.
However, today increasing numbers of mid-sized employers
have been finding innovative ways to share experience as
well. All employee benefit plans fall under the purview of The
Employee Retirement Income Security Act of 1974 (ERISA),
but because self-insured medical plans typically purchase
employer reimbursement medical stop loss for large specific
and aggregate claims, they do not require Department of
Labor (DoL) approval for employer participation.
Generally speaking, there are two basic methods open to
multiple employer groups for self-insuring their employee
claims collectively. One method utilizes a risk retention group
(RRG). Despite a flurry of initial activity surrounding the RRG
structure, it has proven to be more difficult than originally
contemplated due to capital requirements and regulatory
constraints. The second method used is a fronted, reinsurance
captive program to provide group medical stop loss coverage.
Growing interest from middle market accounts
Jeff Fitzgerald, vice president-employee benefits for
Innovative Captive Strategies (ICS), notes that the fronted
reinsured captive programs have received the lion’s share of
activity lately. ICS has been active in the group reinsurance
captive market now for several years. “By using the group
reinsurance captive concept, mid-sized organizations can
better finance employer-based health coverage.”
Fitzgerald adds, “There was some hesitation from groups
up until the Supreme Court decision that confirmed the
implementation of ACA.” Since then, interest in the group
captive concept “has grown significantly as fully insured carri-
ers are predicting significant increases beginning in 2014.”
Most employers today recognize that their cost-effective
option is to maintain their health coverage through some
sort of self-funding vehicle. Fitzgerald points out, “The way
we look at it, it’s the captive which allows these smaller
groups to self-fund with other employers whose interests
are aligned with theirs.” Further, he says, that while there
is literature regarding large employers utilizing their cap-
tives for accident and health coverages in their
MID-MARKET SOLUTION
FOR EMPLOYEE
BENEFIT PROGRAMS
Using a group captive for medical stop loss coverage
SPECIAL REPORT
© Rough Notes magazine
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