Are You a Small-to-Medium Business Frustrated With Healthcare Costs? Try a Group Captive

A broken health insurance market demands creative solutions.

I frequently ask employers a rhetorical question: "who is frustrated with the cost healthcare insurance?" Usually, this results in a chuckle and a nod or raised hand. The fact of the matter is that the habitually increasing premiums, lack of transparency, inconsistency of quality clinical outcomes and no strong solution in the marketplace has left most employers and their employees throwing their hands up in frustration.

As a result of this frustration, the healthcare market is experiencing major ripples from increased demand for transparency and a growing number of new entrants into the healthcare space who are hoping to take advantage of the abysmal status quo.

While some of these trends could result in positive changes for employers, this is far from certain and would likely take many years to manifest. In the meantime, plan sponsors will continue to get hammered by premium hikes. The escalating costs of providing healthcare to employees are particularly severe for small-to-medium sized businesses (SMBs), who often have less financial cushion available than their larger counterparts. While there are no silver bullets that can solve all of the issues associated with healthcare, there is one lesser-known healthcare plan funding model that is particularly well-suited to SMBs.

This funding model, called a group health insurance captive brings together multiple like-minded SMBs in a healthcare partnership that helps them to achieve the scale and stability, proactively manage risk, and control costs over the long-term.

Group insurance captives are a way for multiple small-to-medium sized businesses to band together and form a healthcare partnership.

This article in Benefits Magazine highlights a group of employers who formed a captive with 2,500 employees and later touted average annual medical increases of 2.0% from over a five year period. In the current healthcare climate, where renewals are often closer to 10%, this type of cost containment can be truly transformational. So how did this group of employers achieve such a great result?

Well, the first step is to take a leap of faith and to challenge your organization to do something that's outside the norm. This can be difficult, but is necessary to enact meaningful change. As with any type of serious reform, there may be some initial difficulties with change management in the beginning. However, the potential financial rewards for switching to a new funding model can be quite large.

For more information on how to fine-tune your company health plan and save money, read OneDigital's Cost Containment Playbook, which has 25 strategies for healthcare, pharmacy, and workforce optimization.