In our previous article, we highlighted the benefits of adopting a Total Cost of Care model for employers to accurately assess and manage healthcare expenses for their employees beyond just health insurance costs. Taking this strategic approach further, how do group captive structures support self-funded employers in optimizing their total healthcare expenditure?
Understanding that managing healthcare costs is a marathon and not a sprint is crucial. Group captives provide a sustainable funding mechanism for stop-loss insurance, facilitating a long-term strategy rather than being constrained by annual insurance renewal cycles. Central to this approach is the COST (Community, Ownership, Stability, Trust) advantage. This series begins by exploring the Community aspect of group captives.
Self-funding empowers employers with visibility and control over their healthcare costs—a significant shift for those transitioning from fully insured plans. This newfound transparency opens up extensive possibilities for cost management but can also be daunting. Many mid-sized employers may not have in-depth healthcare expertise and prefer to concentrate on their primary business activities, necessitating reliable and effective support systems. Here, the community aspect of group captives becomes invaluable.
Community of Solutions: One of the principal benefits of self-funding is the capacity to implement cost containment strategies directly affecting healthcare expenditures. These strategies might include pharmacy benefit management with high-cost drug protocols, specialized medical management programs, organ transplant carve-outs, and data analytics for early identification and proactive management of high-cost conditions.
For employers new to self-funding, the range of options can be overwhelming. It’s crucial to understand what services are essential and their cost-effectiveness. Often, vendors charge based on per employer per month (PEPM) or per plan participant per month (PPPM) rates, which can significantly inflate costs, especially for infrequently used services. Percentage of savings payment models aligns vendor and employer interests but require careful negotiation regarding the terms of shared savings. Group captives excel in assembling panels of cost containment experts and securing favorable pricing through collective bargaining.
Community of Peers: Despite the advantages of cost containment strategies, navigating self-funding can feel isolating. This is where a community of peers within a group captive proves beneficial. Being part of a group captive allows employers to connect with others facing similar challenges, share successes, and validate the effectiveness of cost containment vendors. This collective experience not only reduces the sense of isolation but also aligns financial interests among members, fostering a supportive network that is financially incentivized to help each other succeed. The risk-sharing aspect of group captives creates a financial bond among members, enhancing cooperative efforts to manage healthcare costs effectively. Additionally, group captives provide benchmarks for healthcare costs and introduce a healthy competitive element among members.
To learn more about joining or starting a group captive, interested parties can contact info@mslcaptives.com. Our next article will discuss the Ownership aspect of group captives, highlighting how participants benefit from thinking like owners rather than mere buyers.
