The COVID-19 pandemic has “lit the spark” for increased interest around medical stop-loss captives, as was discussed in a session at the World Captive Forum in Miami last week.
The market impacts of the pandemic have favoured self-insurance programmes with layered contractual relationships, observed Karin Landry, CEO of Spring Consulting. She added that there has been a significant growth in spend through traditional pharmacy benefit managers, which usually accounts for between 20 and 30 per cent of spend on any given programme.
As the world gradually emerges from the pandemic, data-driven priorities around medical stop-loss solutions include pharmacy, disease regression strategies, behavioural access and literacy, healthcare navigation, and additional networks solutions, said Landry.
In particular, point solutions — a specific service offered by a vendor within a benefits programme — were identified as a key provider of efficiency. Landry noted that of the organisations that offer point solutions, second opinion and medical opinion programmes are the most common (51 per cent) service purchased by a vendor.
In the session, David White, vice president of AIG Captive Solutions, highlighted that the most important consideration when joining a medical stop-loss captive is the formula for which the captive shares profits and losses.
A real-life example of a medical captive operating throughout the pandemic is edHEALTH, which was discussed during the session. Tracey Hassett, CEO and president of edHEALTH, observed significant changes in the behaviours of employers since the pandemic.
For example, the majority of US health plans now cover the cost of COVID-19 tests as the world gradually shifts into an endemic — however, if the healthcare plan is self-insured, this cost then goes back to the employer.
Another problem arising from the pandemic is deferred care, as people either put off going to the doctor if their condition is not COVID-related, or take longer to receive a diagnosis as hospitals shift their priorities. This means that many people then require more advanced, and therefore more expensive, treatment.
This, along with other COVID-related healthcare costs, places stop-loss captives in a prime position to offer accessible and affordable solutions.
Hassett explained that as a group of 25 educational institutions (including colleges, universities and secondary schools), edHEALTH was formed to “bend the trend” in rising healthcare costs. She added that the captive has around 14,700 covered employees and a total of 30,900 covered lives when factoring in the family of faculty and staff.
The Vermont-domiciled captive structure operates with a working layer in which each member institution pays a monthly premium that includes third-party administrator and administrative fees, as well as individually underwritten claims and stop-loss premium costs.
Each member selects their own level of risk based on their individual experience and risk tolerance level, and pays for their own claims below their established self-insured retention level. The edHEALTH captive structure then pays for claims in excess of this, and members have the option to purchase aggregate protection for claims exceeding 125 per cent.
Certainly, edHEALTH demonstrates the need for a medical captive in the current market conditions and proves a successful structure — the captive has retained savings of US$6.7 million since its inception through 2020, and has paid out $3.2 million in dividends.
