- 4,096
How much you want to bet?
Health Benefits Captives
- Thread starter brandeeno
- Start date
How much you want to bet?
Me too.
I get the concept that you can beat a carrier ASO by piecing out a lot of the parts like pbm and behavioral health but I don't see any savings otherwise. Maybe I'm wrong.
In the end, there are only 2 factors that can make your total expected/max cost deal look better than the other guy's deal:
1. How sharp your discounts are
2. How skinny you can get on expenses
The rest? ... Superior risk selection and access to self-funding for smaller-ish group? I'm not really sold on that.
And someone help me with this.... If you have 20 (or 80 or 200) groups in the captive and 1/2 run great and the other 1/2 stink experience-wise, and there are above average large claims don't these two things happen? :
1. There's a big increase to the "risk share" piece to al groups.
2. The 50% that are running good are going to bolt and find another deal.
If the TPA is tied into the marketing arrangement strongly enough, there's no way they let a nice group they've been admining move without trying to retain them outside your captive. I suppose if there are contractural terms that stop a group from doing so, that's different but ....if that's the case, how do you get them to buy in in the first place?
Also, if Group A in the Captive has 200 ees and group B has 50, how is the risk-corridor shared? A will hit $25k (or whatever level) several times more frequently than B.
I suppose you could capitate the risk-share pool either up front or on an incurred basis or set different spec levels by ee size for each group but that's, to me, is impossibly complicated.
And in practice the $25k-$250k risk-share is absolutely, in practice, the same thing as reinsurance. It is protection against a large claim ruining the employer's plan. The money may come from 10 pockets instead of just one but it's no different. At some point, depending on their size, stop loss carriers reinsure their own stop loss... maybe at $250k or higher. I don't see the difference.
Me too.
I get the concept that you can beat a carrier ASO bypiecing out a lot of the parts like pbm and behavioral health but I don't seeany savings otherwise. Maybe I'm wrong. –not quite. A cooperative risk sharing captive has morecosts, not much more but some. The keyis that these programs are best for groups that are too small to be on an ASO/stand-aloneself-funding plan and needs the extra protection of the captive.
In the end, there are only 2 factors that can make yourtotal expected/max cost deal look better than the other guy's deal:
1. How sharp yourdiscounts are
2. How skinny youcan get on expenses
As a general rule, true. But you are omitting the ability to changebehavior and other cost control tools and incentives.
The rest? ...Superior risk selection and access to self-funding for smaller-ish group? I'mnot really sold on that. ---Captive sets up rules forcertain types of risk and if they abide by it they can do some significantcherry picking.
And someone help me with this.... If you have 20 (or 80or 200) groups in the captive and 1/2 run great and the other 1/2 stinkexperience-wise, and there are above average large claims don't these twothings happen? :
1. There's a bigincrease to the "risk share" piece to al groups.
2. The 50% thatare running good are going to bolt and find another deal.
Not really. Everyone needs to understand that there willbe groups that run a deficit and groups that run a surplus. It usually runs every 4-5 years.
If the TPA is tied into the marketing arrangementstrongly enough, there's no way they let a nice group they've been adminingmove without trying to retain them outside your captive. I suppose if there arecontractural terms that stop a group from doing so, that's different but ....ifthat's the case, how do you get them to buy in in the first place?—captive is run by a sponsor, such as a broker, not thetpa. At least in our world.
Also, if Group Ain the Captive has 200 ees and group B has 50, how is the risk-corridor shared?A will hit $25k (or whatever level) several times more frequently than B.—your right, you cannot have a whale with a smallminnow. Need to diversify groups butmake sure there is not one large whale at higher risk.
I suppose you could capitate the risk-share pool eitherup front or on an incurred basis or set different spec levels by ee size foreach group but that's, to me, is impossibly complicated. –possible.
And in practice the $25k-$250k risk-share is absolutely,in practice, the same thing as reinsurance. It is protection against a large claimruining the employer's plan. The money may come from 10 pockets instead of justone but it's no different. At some point, depending on their size, stop losscarriers reinsure their own stop loss... maybe at $250k or higher. I don't seethe difference.—yes and no. The entire amount is ceded back to thereinsurer so that you have a stop-loss contract in place, otherwise the groups wouldbe self-funding themselves. It does haveprotection for the single employer, since the other employers will be helpingto pay the large claim. Anything overthe agg ($250k, is the responsibility of the reinsurer).
Hope this helps.
I get the concept that you can beat a carrier ASO bypiecing out a lot of the parts like pbm and behavioral health but I don't seeany savings otherwise. Maybe I'm wrong. –not quite. A cooperative risk sharing captive has morecosts, not much more but some. The keyis that these programs are best for groups that are too small to be on an ASO/stand-aloneself-funding plan and needs the extra protection of the captive.
In the end, there are only 2 factors that can make yourtotal expected/max cost deal look better than the other guy's deal:
1. How sharp yourdiscounts are
2. How skinny youcan get on expenses
As a general rule, true. But you are omitting the ability to changebehavior and other cost control tools and incentives.
The rest? ...Superior risk selection and access to self-funding for smaller-ish group? I'mnot really sold on that. ---Captive sets up rules forcertain types of risk and if they abide by it they can do some significantcherry picking.
And someone help me with this.... If you have 20 (or 80or 200) groups in the captive and 1/2 run great and the other 1/2 stinkexperience-wise, and there are above average large claims don't these twothings happen? :
1. There's a bigincrease to the "risk share" piece to al groups.
2. The 50% thatare running good are going to bolt and find another deal.
Not really. Everyone needs to understand that there willbe groups that run a deficit and groups that run a surplus. It usually runs every 4-5 years.
If the TPA is tied into the marketing arrangementstrongly enough, there's no way they let a nice group they've been adminingmove without trying to retain them outside your captive. I suppose if there arecontractural terms that stop a group from doing so, that's different but ....ifthat's the case, how do you get them to buy in in the first place?—captive is run by a sponsor, such as a broker, not thetpa. At least in our world.
Also, if Group Ain the Captive has 200 ees and group B has 50, how is the risk-corridor shared?A will hit $25k (or whatever level) several times more frequently than B.—your right, you cannot have a whale with a smallminnow. Need to diversify groups butmake sure there is not one large whale at higher risk.
I suppose you could capitate the risk-share pool eitherup front or on an incurred basis or set different spec levels by ee size foreach group but that's, to me, is impossibly complicated. –possible.
And in practice the $25k-$250k risk-share is absolutely,in practice, the same thing as reinsurance. It is protection against a large claimruining the employer's plan. The money may come from 10 pockets instead of justone but it's no different. At some point, depending on their size, stop losscarriers reinsure their own stop loss... maybe at $250k or higher. I don't seethe difference.—yes and no. The entire amount is ceded back to thereinsurer so that you have a stop-loss contract in place, otherwise the groups wouldbe self-funding themselves. It does haveprotection for the single employer, since the other employers will be helpingto pay the large claim. Anything overthe agg ($250k, is the responsibility of the reinsurer).
Hope this helps.
- 4,096
I still have my doubts.
Changing behavior to have a true impact on claims is unrealistic.
We can help with lifestyle changes with complicated diabetics but there is nothing we can do with any of the stages cancer.
I have been down this road multiple of times. There really is no ROI on a wellness program. Now if a captive has a much more active DM then that might be something. I can do a data dump with a lot of firms.
Changing behavior to have a true impact on claims is unrealistic.
We can help with lifestyle changes with complicated diabetics but there is nothing we can do with any of the stages cancer.
I have been down this road multiple of times. There really is no ROI on a wellness program. Now if a captive has a much more active DM then that might be something. I can do a data dump with a lot of firms.
- Thread starter
- #25
This is true with any health insurance carrier whether it's fully insured, traditional self-funded, or captive.
You bring the TPA with you. It's really no different than a traditional arrangement. All it takes is a phone call, a two hour meeting, maybe a round of golf, and it's done. If the TPA doesn't want to play, then you just move it.
Each group has their own contract with the carrier. They don't share the corridor.
I don't see the difference either.
Each group has their own contract with the carrier. Good running groups are rewarded with lower increases. Poor running groups are penalized with higher increases.
There is no magic in a captive. You don't unlock the holy grail of healthcare savings by joining or forming one. Risk to any health plan is very real, and no alternative out there today is considered the best. It's different for each group. A captive is just another tool available to employers who offer health coverage. I hope that Brokers would want to have access to all the options out there. Especially alternative risk options. It gets you in the door. Who cares what you sell after that...
- 4,096
How about posting some comparisons quotes between a true ASO plan and captive? Even a fully insured quote vs captive.
I would be happy to see where you guys are competing.
We don't need any names but SIC code would be nice.
I would be happy to see where you guys are competing.
We don't need any names but SIC code would be nice.
Last edited:
- Thread starter
- #28
ConwayNick
New Member
- 10
Brandeeno/leevena,
I know not much activity on this thread in a couple of months, but I was hoping I could follow up with both of you on a couple questions.
I do work for a Pharmacy Benefits Consulting Firm, but I was hoping to ask some other questions regarding what markets you are in type of employers etc.
I have spoke to a group that has successfully set up several captives and I would assume it works very similarly, but I am very interested in the progress of these through the ACA transition.
Send me an email if you could at [email protected]
Thanks!
I know not much activity on this thread in a couple of months, but I was hoping I could follow up with both of you on a couple questions.
I do work for a Pharmacy Benefits Consulting Firm, but I was hoping to ask some other questions regarding what markets you are in type of employers etc.
I have spoke to a group that has successfully set up several captives and I would assume it works very similarly, but I am very interested in the progress of these through the ACA transition.
Send me an email if you could at [email protected]
Thanks!
