Nontraditional methods providing health insurance come and go, but few have disrupted the industry so effectively as captive insurance. Here's some information about captive insurance and how you can use it to your benefit.
What Are Captive Insurers?
Captive insurers are nontraditional insurance companies funded and owned by their insureds. Legally, the captive insurer is a separate entity from the parent company. With captive insurance, you're no longer beholden to the commercial marketplace. Most large businesses have at least one captive insurer to cover some of their risks and many have multiple that cover different risks.
Captive Insurance Vs. Self-Funded Health Insurance
At a surface level, captive insurance sounds an awful lot like self-funded health insurance, and the two do go hand in hand. In such, the Captive would be used to provide stop-loss protection on a more traditional self funded plan vs having to purchase more expensive stop loss insurance from a carrier.
Using Captive Insurance To Your Benefit
With captive insurance, you are able to control costs and manage risks but it also gives smaller businesses access to coverage that traditional insurers may not be willing to take on. This may be because the risk is too obscure or because insurance for the risk is too expensive. Either way, with captive insurance you're able to fill in any holes in your coverage. This is not limited to health insurance either. You can set up a captive insurer to cover almost any risk faced by your business.
The Legality Of Captive Insurance
As with any nontraditional method of health insurance, there are many legalities to consider. With all the tax benefits offered by captive insurers it would be a miracle if a few bad actors didn't take advantage. There have been a few cases where captive insurers were set up solely to take advantage of tax deductions and this quickly caught the attention of the IRS.
Should you choose to pursue captive insurance you should pay careful attention to the laws specific to your location and your industry. Not being in compliance could lead to the IRS knocking on your door. Utilizing a consultant who specializes in this, and other non-traditional methods for helping mid-size businesses contain healthcare costs, would be a wise course of action if you wish to investigate and consider captive insurance.
At Summerlin-Roberts we leverage our expertise in cost containment to provide the best possible benefits at the lowest possible price. Please, contact us today for more information on providing affordable health insurance for your employees.