Paying an insurer to take full risk is equivalent in many ways to renting a house. The premium/rent paid out is never returned when expenses are lower than expected. The policy holder/occupant is not in control of design, quality, or maintenance.
Participating in a captive for health plan stop loss is very similar to purchasing a condominium with a co-op arrangement. The costs associated with design, maintenance, and repairs are shared. Under a captive or a co-op, the employers / condo owners with fewer expenses end up subsidizing those with greater expenses. Often, those larger expenditures can be attributed to poor choices made by the employer / condo owner in managing their own population / condominium. As a consequence, an employer who manages it’s own population’s health more effectively than other employers inside the captive is not compensated for the effort.
It’s a new chapter for health plans. The stop loss market is very competitive and growing. In addition, there are many new hybrid self-funding arrangements which lower the risk for smaller employers. Whether fully insured or using a stop loss captive, it’s a good time to explore other funding options.