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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Managing Medical Stop Loss in Your Captive

Health Care Insurance
March 13, 2015

Stephen Hannabury, president of Educators Health Insurance Exchange of New England (EdHealth); John Cassell, Spring Consulting Group; and Jess Crary, Primmer Piper Eggleston & Cramer PC, provided Captive Insurance Companies Association (CICA) delegates an in-depth review of developing an operational strategy for a medical stop loss captive.

John Cassell, Spring Consulting, opened the panel discussion by emphasizing that the creation of EdHealth “was not just about cost savings.”

EdHealth evolved over a period of several years. It started when the Boston Consortium, composed of Massachusetts college human resources administrators, started discussions about how to slow medical insurance costs. In 2007, they began work on a health management initiative called "Healthy You" to lower the level of claims. That initiative was launched in 2011. Over 20,000 faculty and staff have participated in this program, which EdHealth CEO Hannabury said had become a “source of great employee satisfaction.”

In 2011, Collaborative Education Ventures of New England (CEVoNE), a Massachusetts LLC, was created to bring together education institutions around New England to develop new programs. CEVoNE became the sponsoring entity of EdHealth, which was formed as another LLC in Massachusetts. CEVoNE provided $1.5 million to fund the initial development of EdHealth in 2012.

The purpose of EdHealth was to implement an integrated program to coordinate the management of member educational institutions' self-funded healthcare plans. Each of the individual institution self-insured plans set its own self-insured retention levels. Subsequently, EdHealth developed Educators Health Insurance Exchange of New England, a medical stop-loss captive that was launched on July 1, 2013. The reciprocal insurance structure was chosen because the participating education institutions are nonprofits. This form provides favorable tax treatment.

The chart in slide 11 of this EdHealth slide presentation demonstrates how the captive provides coverage above the individual participants' self-insured retentions.

EdHealth’s captive results for the first year of operations include significant savings on administration charges as well as 22 percent savings on stop loss premiums. In addition, since many schools were initially fully insured, additional gains of an estimated at 2.5-4.0 percent were saved by self-funding.

As EdHealth enters year 2, it is going strong and has a very ambitious set of goals. The member institutions are focused on developing a strategy that will continue to provide quality care with more participant involvement in their care and cost containment with further collaboration on disease management, wellness, and prescription costs, leading to a healthier, more effective workforce that simply needs to spend less money on treatment. The captive started with six initial members and is expected to grow to fifteen members during its second year of operations. EdHealth is also in the process of implementing expansion plans to other New England states.

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