In the final installment of our series on the COST advantages of group captives in managing an employer’s total cost of care, we focus on the “T” for Trust. While Community, Ownership, and Stability address general characteristics of group medical stop loss captives, Trust concerns the selection and operation of a specific captive.
Selecting the Right Service Providers: Trust within group captives begins with confidence in the service providers. Issues often arise when a program prioritizes the interests of service providers over those of employer participants, who bear the actual risks. Essential questions include the selection process for these providers, the control that participating employers have over them, and the feasibility of terminating a provider’s services if their performance is unsatisfactory.
A fundamental aspect of trust is whether employers can continue working with trusted existing vendors within the captive or must switch to unfamiliar ones that may not align with their expectations.
Transparent Compensation Structures: Understanding the compensation structure of vendors within the captive is critical. Group captive programs often embed vendor compensation into premiums or add per-employer-per-month (PEPM) charges, which can escalate costs for services that may not be utilized regularly. The transparency of compensation, including any overrides—additional earnings that brokers or agents might receive based on the volume or performance of their business with a carrier—is crucial.
Employers should be fully informed about all compensation facets, including the specifics and limits of percentage-based savings charges.
Evaluating Participant Composition: Trust also extends to the composition of the employer group within the captive. Successful captives often involve employers who have pre-existing relationships, whether through industry associations, regional affiliations, or shared service providers. This familiarity can enhance cooperation and stability, although it’s important to balance this with the benefits of diversifying risk across a larger group.
Governance and Control: The governance structure of the captive is a cornerstone of trust. Employers should know who controls the captive, the decision-making process, and the rules governing membership and risk sharing. This includes understanding how distributions are made, whether they are based on individual performance or a collective metric, and how risks are allocated during less favorable periods.
Effective governance and clear, transparent policies ensure that all participants are treated fairly and equitably, fostering a supportive and cooperative environment that benefits all members.
Active engagement and transparent governance are critical in building and maintaining trust within a group captive, enabling participants to effectively manage their total cost of care through collective effort and mutual support.
For further information on joining or establishing a group captive, interested parties are encouraged to contact info@mslcaptives.com. This concludes our series on the COST framework, emphasizing the critical roles of Community, Ownership, Stability, and Trust in the effective management of group captives.