In addition to the specific policy, the medical stop loss captive also incorporates an aggregate policy. This policy provides protection when the total claims incurred by all employees collectively exceed a predetermined threshold within a specific period. The aggregate policy serves as a safeguard against excessive claims costs that could strain the financial resources of the employer. The combination of the specific and aggregate policies within the medical stop-loss captive framework enables employers to manage their healthcare costs effectively. It allows businesses to self-fund their employee healthcare benefits while mitigating the financial risks associated with high-cost claims. By assuming a portion of the risk through the captive structure, employers have greater control over their healthcare expenditures, gain transparency into the claims process, and can potentially save costs compared to traditional insurance arrangements. In essence, self-insured retention provides businesses with an opportunity to have greater control over their healthcare costs and benefits. It allows them to customize their healthcare plans, manage risk, and potentially reduce premium expenses. However, the decision to implement an SIR should be based on a thorough evaluation of the business's financial capacity, risk tolerance, and ability to effectively manage healthcare expenses. By carefully weighing the advantages and challenges associated with self-insurance, businesses can make informed decisions that align with their unique circumstances and goals. 7.2.1 Who Is This A Good Fit For? Generally speaking, the employee benefits captive is a good fit for small and mid-market companies that may not have the same financial resources as larger organizations. These businesses often face budgetary constraints and may find it challenging to allocate a significant portion of their revenue toward the cost of new employee benefits. This can put a strain on their operating budgets and limit their ability to provide comprehensive healthcare coverage to their employees. For these companies, using reserves that were earmarked for healthcare coverage to address revenue shortfalls in other areas of the company becomes a common practice. However, this approach can lead to a lack of financial stability and inadequate coverage for employees. Implementing an employee benefits captive allows these companies to take control of their healthcare costs while ensuring the well-being of their workforce. By establishing a captive insurance arrangement, small and mid-market companies can effectively self-fund their employee benefits. This means that instead of relying solely on traditional insurance providers, they assume a portion of the risk associated with healthcare expenses. The captive structure allows these businesses to build up reserves over time, which can be used to cover claims and manage fluctuations in healthcare costs. Moreover, the employee benefits captive provides these companies with greater flexibility and customization options for their benefit plans. They can tailor the coverage to meet the specific needs of their workforce and adjust it as necessary. This level of control empowers small and
72
Made with FlippingBook - Online Brochure Maker