As of fiscal year 2015, Healthcare Services Group will transition its workers compensation and certain employee health and welfare insurance programmes to HCSG Insurance, its wholly owned captive insurance subsidiary.
HCSG Insurance currently provides general liability coverage to the group.
The captive was formed in January 2014 to provide Healthcare Services Group with “greater flexibility and cost efficiency” in meeting its property and casualty and health and welfare needs, including health insurance requirements for individual client facilities mandated by Patient Protection and the Affordable Care Act.
In conjunction with the aforementioned insurance programmes being administered and provided by the captive, during Q4 of 2014, the group will commence the reorganisation of its corporate structure through the formation of approximately ten separate legal entities, each consisting of divisional and regional operating units.
In addition to the administrative and operational benefits provided by the captive, the group has stated that it expects the insurance programme enhancements to be accretive to earnings in fiscal year 2015 and thereafter.
Additionally, upon completion of its reorganisation, the group has said that it expects to accelerate, for tax purposes, the deductibility of estimated current and future insurance claims.
It commented: “The resulting tax benefit should favourably impact cash and marketable securities by approximately $20 million upon full funding of the captive.”
Healthcare Services Group recorded an adjustment in Q3 of 2014 to reflect estimated current and future insurance claims projected to be closed out over the next 15 to 17 years, along with charges related to the corporate reorganisation, self-funded health insurance programme transition and other related expenses.
