Vermont Report 2016

The Future Is Now

Mid-size employers transitioning from fully insured health care plans are intrigued by stop-loss captives.
By: | April 4, 2016 • 6 min read

The relationship between captive insurance and health care is decades old. And it is very robust in the captive domicile of Vermont, which added seven health care captives in 2015 and now houses 96 health care captives overall.

Advertisement




Now the domicile is poised to take advantage of its regulatory expertise to house medical stop-loss captives, for which some insurance professionals see a bright future.

One of them is Mark Tabler, executive director of Genesis Re, a segregated cell medical stop-loss captive, which redomesticated from Arizona to Vermont in 2015.
(Tabler also launched a separate medical professional liability risk retention group, Innovative Physician Solutions, of which he is COO.)

Tabler, the former president of the Arizona Captive Insurance Association, said he has found his calling.

“Once I got into the captive industry through this organization, it was just exciting,” he said. “I wouldn’t want to be in anything else.”

Stop-loss captives are, in essence, a type of reinsurance that kicks in to cover employee health care costs above a certain limit. And they have a number of advantages, according to Tabler.

Steve Gransbury, president, Accident & Health, QBE North America

Steve Gransbury, president, Accident & Health, QBE North America

That’s especially true of the one he operates, he said.

Genesis Re is owned by TPA and benefits company SIHO Insurance Services, which has its own book of business, as well as managing a large number of administrative services only (ASO) contracts, so the company has a good understanding of how to manage the health of large populations of people, Tabler said.

By setting up its own captive, it is able to apply that expertise to finance and control its exposures — and recoup any savings gained from loss control.

Steve Gransbury, president, accident and health for QBE North America, is another supporter of the captive stop-loss option.

The benefits of stop-loss captives are manifold, he said, but the primary ones are control and transparency.

“For a group captive, there is control in how to approach risk with economies of scale not available to mid-sized employers who don’t participate in a group captive,” he said.

“For a single-parent captive, there is control over financing or predictable risk internally versus the commercial market.”

Because captive premiums are treated as ordinary business expenses, he continued, there are incentives for “greater risk, claim and reserving control,” not to mention to keep underwriting profit and maintain stable prices.

Not Loved by All

Medical stop-loss captives aren’t without opposition though.

Some regulators perceive stop-loss captives as instruments for side-stepping the provisions of the Affordable Care Act.

State legislators in Minnesota and Rhode Island, for instance, considered putting floors on deductibles or increasing the attachment points for stop-loss captives — the dollar limit amount at which stop-loss would kick in above primary health insurance.

California passed a law that limited stop-loss captives to employers with 100 or more workers.

In July 2013, the captive regulator in Washington, D.C. took an even stronger stand. Dana Sheppard, associate commissioner of the district’s Department of Insurance, Securities and Banking, declared:

“Washington, D.C. is not in favor of allowing small employers located in D.C. to self-insure their health care risks, including the establishment of medical stop-loss captives, if their motivation for doing so would result in removing young and healthy persons from the exchange, leaving older and less healthy employees in the exchange.”

Tabler’s captive avoids these concerns by having a high attachment point at $500,000, too rich for small employers.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.” — Steve Gransbury, president, accident and health for QBE North America.

Another obstacle to stop-loss captive success, however, is how many employers, whether big or small, are actually interested in participating in them.

Advertisement




The experience of one captive, the Central Coast Community Mutual Insurance Co., is cautionary.

Formed in 2011 by the Community Hospital of the Monterey Peninsula (CHMP), the group stop-loss captive has since been trying to recruit members — unsuccessfully.

As hospital CFO Laura Zehm admitted, the parent company is at a do-or-die point in 2016; if they still haven’t brought on additional employers (it currently just involves the hospital’s and one other employer’s employee populations), they will consider giving it up.

“We had interest, for sure,” she said of other employers’ attitudes to the stop-loss captive over the past few years. “We do get calls.”

But eventually employers are dissuaded by brokers who promise to find them cheaper coverage elsewhere. It does not help the captive’s case that the commercial stop-loss insurance market is “really soft.”

The CHMP captive has so much to offer beyond just its coverages though. As part of the captive’s offering, members can tap into the hospital’s physician networks.

Laura Zehm, CFO, Community Hospital of the Monterey Peninsula

Laura Zehm, CFO, Community Hospital of the Monterey Peninsula

Zehm’s captive has its own TPA, which collects data from claims and then analyzes the information and applies it for better patient care.

For instance, through data, they can spot when a patient would benefit from six months of physical therapy before having to get his back or neck operated on. Or maybe never have that surgery.

For its all-in effort this year, Zehm said, the captive also made improvements. It partnered with the brokerage Alliant to gain the broker’s buy-side understanding. Zehm asked Alliant: If we don’t have anything worth selling, let us know.

Alliant didn’t reject them but instead offered ways to better the captives’ offerings.

Since then, the captive lowered costs within its physician network and incentivized physicians to keep member employees healthy.

“We continue to learn how to do this,” Zehm said. “We’re fixing everything that might be a barrier.”

High Interest in Stop-Loss Captives

While Zehm and Tabler provide an on-the-ground perspective of the benefits and challenges of stop-loss captives, the 30,000-foot perspective is one of optimism.

“While interest still remains very high, we’re actually seeing more deals get done over the last couple of years. In particular, with mid-sized employers that are looking at transitioning to self-insurance from fully insured health plans,” said QBE’s Gransbury.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.”

Gransbury said that post-ACA and the removal of annual and lifetime benefit maximums, large employers are buying stop-loss coverage with unlimited reimbursement benefits and using existing single-parent captives to finance certain layers.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.” — Steve Gransbury, president, Accident & Health, QBE North America

Then again, with every Republican presidential candidate since the beginning of the 2016 election season declaring that he or she would repeal the ACA if elected, perhaps the issue of how employers can best finance their employee health care benefits is far from moot.

It’s going on eight years that we have heard about uncertainty around health care, but Tabler said people are still waiting to see what will happen to the ACA before they feel totally settled and comfortable in their health care benefits arrangement.

Advertisement




Whatever happens this November, employers can rest assured that Vermont will continue to be a home for health-care-related captives.

On the whole, captive insurance will continue to serve as an alternative and extremely innovative approach, whether it’s for professional liability, stop-loss coverage or another health care-related exposure. &

The R&I Editorial Team may be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2017 Teddy Awards

The Era of Engagement

The very best workers’ compensation programs are the ones where workers aren’t just the subject of the program, they’re a part of it.
By: | November 1, 2017 • 5 min read

Employee engagement, employee advocacy, employee participation — these are common threads running through the programs we honor this year in the 2017 Theodore Roosevelt Workers’ Compensation and Disability Management Awards, sponsored by PMA Companies.

A panel of judges — including workers’ comp executives who actively engage their own employees — selected this year’s winners on the basis of performance, sustainability, innovation and teamwork. The winners hail from different industries and regions, but all make people part of the solution to unique challenges.

Advertisement




Valley Health System is all-too keenly aware of the risk of violence in health care settings, running the gamut from disruptive patients to grieving, overwrought family members to mentally unstable active shooters.

Valley Health employs a proactive and comprehensive plan to respond to violent scenarios, involving its Code Atlas Team — 50 members of the clinical staff and security departments who undergo specialized training. Valley Health drills regularly, including intense annual active shooter drills that involve participation from local law enforcement.

The drills are unnerving for many, but the program is making a difference — the health system cut its workplace violence injuries in half in the course of just one year.

“We’re looking at patient safety and employee safety like never before,” said Barbara Schultz, director of employee health and wellness.

At Rochester Regional Health’s five hospitals and six long-term care facilities, a key loss driver was slips and falls. The system’s mandatory safety shoe program saw only moderate take-up, but the reason wasn’t clear.

Rather than force managers to write up non-compliant employees, senior manager of workers’ compensation and employee safety Monica Manske got proactive, using a survey as well as one-on-one communication to suss out the obstacles. After making changes based on the feedback, shoe compliance shot up from 35 percent to 85 percent, contributing to a 42 percent reduction in lost-time claims and a 46 percent reduction in injuries.

For the shoe program, as well as every RRH safety initiative, Manske’s team takes the same approach: engaging employees to teach and encourage safe behaviors rather than punishing them for lapses.

For some of this year’s Teddy winners, success was born of the company’s willingness to make dramatic program changes.

Advertisement




Delta Air Lines made two ambitious program changes since 2013. First it adopted an employee advocacy model for its disability and leave of absence programs. After tasting success, the company transitioned all lines including workers’ compensation to an integrated absence management program bundled under a single TPA.

While skeptics assume “employee advocacy” means more claims and higher costs, Delta answers with a reality that’s quite the opposite. A year after the transition, Delta reduced open claims from 3,479 to 1,367, with its total incurred amount decreased by $50.1 million — head and shoulders above its projected goals.

For the Massachusetts Port Authority, change meant ending the era of having a self-administered program and partnering with a TPA. It also meant switching from a guaranteed cost program to a self-insured program for a significant segment of its workforce.

Massport’s results make a great argument for embracing change: The organization saved $21 million over the past six years. Freeing up resources allowed Massport to increase focus on safety as well as medical management and chopped its medical costs per claim in half — even while allowing employees to choose their own health care providers.

Risk & Insurance® congratulates the 2017 Teddy Award winners and holds them in high esteem for their tireless commitment to a safe workforce that’s fully engaged in its own care. &

_______________________________________________________

More coverage of the 2017 Teddy Award Winners and Honorable Mentions:

Advocacy Takes Off: At Delta Air Lines, putting employees first is the right thing to do, for employees and employer alike.

 

Proactive Approach to Employee SafetyThe Valley Health System shifted its philosophy on workers’ compensation, putting employee and patient safety at the forefront.

 

Getting It Right: Better coordination of workers’ compensation risk management spelled success for the Massachusetts Port Authority.

 

Carrots: Not SticksAt Rochester Regional Health, the workers’ comp and safety team champion employee engagement and positive reinforcement.

 

Fit for Duty: Recognizing parallels between athletes and public safety officials, the city of Denver made tailored fitness training part of its safety plan.

 

Triage, Transparency and TeamworkWhen the City of Surprise, Ariz. got proactive about reining in its claims, it also took steps to get employees engaged in making things better for everyone.

A Lesson in Leadership: Shared responsibility, data analysis and a commitment to employees are the hallmarks of Benco Dental’s workers’ comp program.

 

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]