Group Captive Meet Medical Expenses

Health Care Reform is debated in ever news outlet, every day. Ideas for a government plan option stir debate along with other wide ranging suggestions on how to stop the runaway cost of health care. Wellness programs, drug and treatment delivery methods along with coverage availability each claim to be the solution. Reducing cost or at least slowing the annual increase in the cost of medical care is the objective. How this objective is achieved is where the conflict arises.

Not surprisingly, the answer lies in a solution that brings together the best of each idea. This article focuses on a delivery method for insurance coverage known as a Group Captive. One of the most attractive features of a Group Captive is it provides the ideal insurance platform to deploy many of the cost saving ideas being discussed in the health care reform debate. The ‘skin in the game’ structure of a Group Captive encourages stakeholders to seek innovative cost saving ideas. In fact, the wellness programs, Rx delivery methods and coverage strategies we hear about as the latest innovation of today have all been tested by self insureds; not surprising when one considers who directly benefits when a medical expense saving is achieved.

What is a Captive?

A Captive is an insurance company that is owned and/or controlled by the insured’s. Captives had their start in the 1960s as a solution for insurance coverage that were not readily available in the standard insurance marketplace. Over the last fifty years, captives have evolved from covering the uninsurable risks of a Fortune 500 Company to insuring everyday exposures like Workers Compensation and Auto Liability of groups and associations. It is the application of this group ownership approach to medical expense coverage that creates the Medical Expense Group Captive Opportunity.

Like other Group Captive’s, the Medical Expense Group Captive is owned and/or beneficially controlled by the group member insured’s. Similar to other Group Captive members or participants, Medical Expense Group Captive participants are commonly homogenous in their business pursuits. An example of groups that have successfully implemented Group Captive strategies in the property & casualty marketplace include physicians, trucking companies, contractors and accountants. In all cases, the homogenous group agrees to band together and share a certain portion of the risk that is common in all of their businesses. The objective of moderating and reducing the cost of insuring their risk is realized when the group’s risk management strategies reduce losses both before and after they happen.

How Does It Work?

Like standard insurance for medical expenses, a Group Captive program requires infrastructure for the effective delivery of claim payments, including a claims administration or TPA company, an insurer to issue the policies and a reinsurer to cover the large or unforeseen loss events. The Group Captive Program then adds a Captive facility that is controlled by the group to assume a portion of the risk that typically retained by the insurer.

The formation of the Captive facility historically caused the captive solutions to be one limited to larger organizations that could afford the time and upfront investment in actuarial, legal and regulatory professionals. Fortunately, the innovation of the segregated account rent-a-captive facility enables the middle market to access the benefits of a Captive solution. These segregated account Captive facilities like our Bermuda domiciled Roundstone Insurance, Ltd. (AA-3194213) enable an insured or group of insured’s to efficiently form a Captive that can serve as the risk assumption entity for the Group Captive Program. This Group Captive entity is functional in weeks with no upfront investment in professional expenses or surplus.

Once the Captive facility is formed and the program’s service providers are engaged, the Group Captive members purchase insurance the same way they do in the standard market; they send in their underwriting information, receive a quote and bind coverage. The execution of a contract referred to as a participation agreement follows along with a contribution of collateral before the insurer issues the medical expense coverage.

The Group Captive then functions like any other insurance company and reports to its owners its financial performance with premium earnings, loss payments, expenses and investment performance activity. Through retaining risk in the Captive and the application of innovative program services designed to prevent and reduce medical expenses, the Group captive members may experience underwriting outcomes for their Captive reinsurer that enable a return of underwriting and investment income. Without the Captive participant by the insured members, these positive underwriting outcomes would have inured to the benefit of the insurance company alone. The return of underwriting and investment income obviously reduces the insured members cost of insuring their medical expense insurance coverage.

Why does it Work?

A Group Captive delivers better results to participating members for several reasons. First, by retaining risk in the captive facility, the insured members are able to capture a portion of the underwriting and investment income a traditional insurance company typically retains. The profit and overhead component of the standard insurance transaction can be anywhere from ten to thirty percent of the premium dollar paid by an insured. When these profit and overhead dollars are captured by the insured members, their overall cost of medical expense insurance is reduced.

Group Captive members also realize results that surpass their traditional insurance experience because of the shared incentive the members have with each other and the other risk takers. Unlike th traditional insurance transaction where you pay your premium and losses are largely irrelevant to you, when a Group captive member contributes capital to a risk bearing enterprise that is dependent on the Group’s loss experience, the incentive is for the member to police its claim activity more diligently. This is the “Skin in the Game” concept. Reduced expenses such as reinsurance are also realized by the Group Captive members who exhibit claim experience more attractive than the overall medical expense insurance marketplace. Shared incentives create shared expense benefits.

Of course, the environment of loss prevention is also stimulated as the Group Captive members search for the most efficient way to deliver Rx, purchase medical procedures and deliver wellness ideas or practices. It is not surprising that many of the best in class health care solutions being advocated by the experts in the national debate have their origin in the Captive or self-insurance marketplace. When a new method to mitigate the health risk of patients can be correlated to a premium dollar savings, it is not surprising the members of Group Captives have a higher commitment level to better health outcomes than the typical insurance buyer. Creativity, commitment, oversight and consistency all contribute to the Group Captive offering the best overall price and solution to escalating medical expense cost.

What Can Go Wrong?

The devil is in the details. The benefits a Medical Expense Group Captive offers can be lost when details such as provider networks, excess reinsurance terms, transaction fees and wellness programs are ignored or mishandled. Should the Group Captive also not utilize the efficiencies offered by established turnkey Captive facilities, the organizational costs required to establish a regulatory adequate Captive facility can take years to recover. Experimenting with a new wellness program can deliver returns with little downside but trying a new service provider without the knowledge and experience with reinsurance could contribute to increased costs for the Group Captive members.

Conclusion

A Group captive approach to insuring your medical expense risk is one of the many strategies escalating medical costs head on. Take control by not only improving your approach to how health care is delivered to your organization, but how the insurance dollar is spent and returned. When the best possible cost containment services are combined with an efficiently built risk retention facility, the conclusion that a Medical Expense Group Captive offers the lowest cost solution for insuring your health care is evident.

How To Effectively Manage Tax Liability On Your Real Estate Invesments?

The US tax system keeps changing, making it even more intricate and very few people are able to initiate proper legal structures to get the most out of their investments.

Owing to the complexities of both investing in real estate and the multifaceted tax laws of the country, investors, especially first-timers, fail to understand how to manage their investments to reduce their burden. As a consequence they end up paying far too much in unnecessary and avoidable taxes on their real estate investments.

Apart from the unforeseen tax liabilities that may make you feel that you are actually investing for the government and not for yourself, it is important to know that real estate investments come with their fair share of legal problems. You certainly would not want your investment, which you have made as a cushion against financial problems in the future, to breed a lawsuit that threatens to snatch away even your existing wealth.

Every year millions of real estate lawsuits are filed in US courts. Not all of them are for genuine causes and there are many that have been filed by people with impious intentions, who want to use loopholes in the law to take away your property or make you pay substantial amounts as compensations for various reasons.

It is extremely important that you seek the counsel of a good real estate investor like Jonathan Feldman Patriot Exploration who also consider as a good tax advisor. It also makes sense to educate yourself about the real estate market and its implications. Your advisor will tell you about the finer aspects but you should at least know the basics like knowing approximately how much tax you will have to pay, or what depreciation of capital investments is?

Being acquainted with the basic terminology puts you in better position to discuss matters with your consultant and you can understand his or her legalese better.

There are two basic ways in which your real estate will be taxed by the government – income tax and capital gains tax. The income that you receive as rent is taxable and you have to pay tax on it. However, the government is more lenient with income received from rent compared to income from wages. The former does not attract FICA taxes whilst the latter does.

Capital gains tax is your second money losing area. The profit that you make upon selling your property is taxed in this manner. However, both these compulsory taxes can be lowered considerably if you avail of the tax loopholes that can be taken advantage of through well-planned and knowledgeable expertise in these fields. The idea is not to cheat but to formulate strategies that legally lessen your tax burden.

For example not many people know that tax deductions are available for interest paid on mortgage, money paid for expert tax advice, advertising expenses and other sundry expenses that we are not aware off. Remember every penny saved is money in your pocket.

Nursing Home Professional Liability Insurance and Managing Risk

Nursing homes are in the unique position of having to provide daily care to an aging population. As with all types of businesses, nursing homes require coverage to protect them from liability issues. Owners of these facilities understand the unique and often difficult insurance challenges they face.

Between constantly changing government regulations, diverse liabilities and an increasingly competitive marketplace, it is critical for owners to secure an agent who specializes in this area, and can develop a comprehensive insurance program that also includes nursing home professional liability coverage. A comprehensive insurance program should include the following:

General Liability coverage
Protection of the physical property, including facilities, grounds and equipment
Professional Lability (malpractice) coverage
Directors and Officers Liability coverage
Employment Practices Liability
Cyber Liability/Privacy
Also, be sure to purchase Workers’ compensation for employees who face risks ranging from back injuries to latex allergies and exposure to pathogens
In order to properly price, underwrite and place this insurance program an agent needs to understand the inner workings of the nursing home business. It requires an understanding of the regulations, as well as how nursing homes work, the management structure, etc.

For example, professional liability risks can vary depending on the relative health and ambulatory abilities of the residents. Because the residents at a nursing home are in different stages, in terms of both physical and mental stability – where some individuals can move freely about and maintain their faculties while some residents are bedridden or may have dementia – many may face the potential of physical and sexual assault.

Therefore there is a very real need for proactive risk management strategies that are essential to mitigate exposures and strengthen the company’s position when facing a potential lawsuit and to avoid becoming a target of legal actions. Having a proactive risk management program in place can greatly reduce these risks. A comprehensive program includes risk assessments; audits; training of staff, including management, supervisors, and caregivers; and recommendations for proactive improvements.

Most importantly, risk management programs should foster a positive and permanent culture change within the organization, one that promotes dignity and respect for both the residents and caregivers. This will reduce the odds of claims and ultimately, can help lower premiums. Speak to a nursing home and retirement facilities insurance specialist about how to best protect the business and, hopefully, reduce nursing home professional liability insurance costs.