The medical stop-loss captive (Healthcare captive) is a risk management strategy that combines elements of both traditional stop-loss insurance and a captive insurance arrangement. In this approach, a business establishes a captive insurance company to assume the risk associated with medical claims made by its employees. The captive assumes this risk on a per-claimant and aggregate basis, providing financial protection to the employer. The specific policy aspect of the medical stop loss captive refers to the coverage provided for individual claims that exceed a predetermined threshold. When an employee's medical expenses exceed this threshold, the stop-loss insurance (specific policy) kicks in to cover the excess amount, protecting the employer from significant financial losses resulting from high-cost claims. On the other hand, the captive component of the arrangement involves the employer setting aside funds in a self-insured retention employer claim fund. This fund acts as a self-insured layer, with the employer assuming the initial risk up to a certain level. By retaining this risk, the employer has greater control over the claims process and can tailor the coverage to meet its specific needs.
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