How Do Employee Benefits Captives Work?

Explaining Captives for Employee Benefits

Captive insurance is a form of alternative risk transfer in which a company, or group of companies, form an insurance company in order to provide coverage for their own risks instead of transferring them to a third-party, traditional insurer.

In a group benefits captive, employers retain the risk of providing certain benefits for employees such as health insurance, life insurance, disability insurance and retirement plans. Instead of paying premium dollars to a traditional insurance carrier, they contribute money into a fund which is used to pay out claims. This often lowers costs, offers more flexibility in benefits offerings and offers access to risk management and decision-making tools that organizations otherwise may not have access to.

Do I Have to Start My Own Captive?

Incorporating your own, single-parent captive insurance company (formed by one company for the sole purpose of retaining the risks of that organization, its subsidiaries and affiliated companies) is an option, and one that many large companies have already taken advantage of.

For mid-sized companies, a group captive is often a better fit. It allows them access to the benefits of captive ownership without having to fulfill the logistical challenges of running an insurance company. They also are able to diversify their risks by pooling similar risks with other trusted organizations that have similarly attractive loss histories.

There are existing group captives that welcome new members, as long as they are able to fulfill their requirements. The criteria depends on the captive, but generally speaking, they are looking for organizations with a good loss history and a similar commitment to risk management and claims management.

What’s the Difference Between a Captive and Self-Insuring?

The main difference is in structure, and the way that each option is organized and regulated.

When an organization self-insures, it is contributing money into a savings account which is used to pay out claims.

An employee benefits captive is a formally-licensed insurance company, formed to pay out claims for its member organizations. While the concept is similar to self-insuring, the organization (or organizations) establish a separate insurance entity.

Why Join a Captive?

An employee benefits captive can offer a faster return than a commercial insurance captive: many companies begin seeing returns after only 18 months, compared to the typical five-year period for commercial insurance captives.

Additional advantages include:

Compared to self-funding, a group medical captive can help organizations looking to gain affordable stop-loss protection against the high cost of ongoing and catastrophic claims. When multiple organizations join together to retain similar risks, they are able to gain better protection against unpredictable claims volume instead of relying entirely on their stop-loss.

While both self-insuring and a captive arrangement give employers have greater control over plan design, a captive can offer additional flexibility and access to benefits that meet the unique needs of their workforce.

What Benefits Can Fit Within a Captive?

Depending on the captive, the following risks may be a fit for a group employee benefits captive:

Because each captive is designed by its member-owners, it depends on the group and which risks they prefer to fit within the captive versus self-insuring or transferring to a traditional insurer.

A captive will also use some of the premium dollars to purchase stop-loss coverage, transferring a portion of the captive’s risk associated with large medical claims to a reinsurer, while still providing coverage for smaller (frequent) claims through the captive.

What Are the Benefits of an Employee Benefits Captive?

Risk pooling – as mentioned above, when organizations pool risk, they are less vulnerable to individual high cost claims.

Additional resources – in a captive arrangement, organizations have access to additional resources that help resolve claims and contain costs, such as:

Fair premiums and stable renewals – average increases in stop-loss renewals can range from 7-9%, and can even max out as high as a 30% increase after unusually challenging claims years. A captive can stabilize these increases.

Access to data & insights – captives share insights from their analytics, offering valuable insights into the way employees are using their benefits and how your money is being spent. This can help inform future decisions about plan design.

No new laser at renewal – carriers can assign a higher specific deductible (a laser) to an individual with a known medical condition or an expectation of high claims. This additional risk is retained by the employer in exchanged for lower premiums, and if those claims do not materialize, the plan can benefit. A captive can eliminate the option for the carrier to carve out a potential claimant from the stop-loss policy, giving their employer the peace of mind of knowing they won’t be financially responsible for their medical expenses.

How Do I Get Started With a Captive?

If you are interested in learning more about employee benefits captives, understand that establishing and operating a captive requires expertise in insurance management. Employers who are considering this approach should consult with a knowledgeable broker who can provide expert consultation and guidance through the complexities of starting or joining a benefits captive.

If you’re interested in discussing your options, contact us.

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Learn More About Captives

Don’t miss the other entries in this series:

Captives 101: What is Captive Insurance?

What is Group Captive Insurance?

Captives vs. Risk Retention Groups: What’s the Difference?

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

Risk Retention Groups vs. Captives – What’s the Difference?

What is a Risk Retention Group?

A risk retention group (RRG) is a method of alternative risk transfer available in the United States, regulated under the Liability Risk Retention Act (LRRA).

An RRG is a state-chartered liability insurance company, formed for the purpose of providing coverage for members within the same industry or facing similar risks with shared insurance needs. Once it receives a license, it can operate in all 50 states.

These licensed companies share liability risks and exposures similar to a captive (and, in fact, could be considered a form of captive).

A Brief History of Risk Retention Groups

In 1981, U.S. Congress passed legislation (LRRA) allowing for the formation of risk retention groups for the purposes of retaining product liability risks. Five years later, they passed the Federal Risk Retention Act (RRA), expanding the coverages allowed within RRGs to include a wider variety of liability exposures.

Differences Between Risk Retention Groups and Captive Insurance

You may recognize some similarities between RRGs and captive insurance, and the truth is, there are far more similarities than differences. Here are a few key factors that distinguish RRGs from captives:

The Benefits of Risk Retention Groups vs. Traditional Insurance

RRGs provide an alternative to traditional insurance options by enabling businesses to have more control over their insurance coverage and costs. By pooling risks between members who share similar liabilities, members of an RRG can collectively manage risk. Here are a few examples of how that benefits members:

What Types of Risks Fit Best in Risk Retention Groups?

Risk retention groups are most commonly formed as risk-bearing entities for writing liability insurance, and are used by similar organizations facing similar risks. However, their exact use depends on the needs of the organizations in the risk retention group.

Some examples of common risks covered by RRGs include:

A risk retention group can include a variety of coverages, but is limited to liability coverage. While the above list gives you an idea of the types of risks which are often included, it depends on the organizations, what risks they share and whether there is a shared interest in retaining these risks collectively.

Where Can I Learn More About Captives?

If you are interested in learning more about captives, take a look at this deep dive into the types of captives, the advantages of forming or joining a captive, and what you need to know before considering this alternative risk solution.

Should I Consider a Risk Retention Group?

If your organization has been dealing with hard markets, and you’ve been seeing your premiums for liability insurance rise in recent years, a risk retention group could be one solution that provides relief from rising insurance costs.

This should not be done as a short-term solution – as with any method of alternative risk, this is a long-term solution. However, if you have spent more on premiums than claims over the last five years, and have liability exposures that could fit into an RRG, you should consider a RRG or captive.

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Learn More About Captives

Don’t miss the other entries in this series:

Captives 101: What is Captive Insurance?

What is Group Captive Insurance?

How Do Employee Benefits Captives Work?

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

What is Group Captive Insurance?

A group captive is an alternative to traditional insurance in which a group of organizations provide coverage for their own risks by forming their own licensed insurance company instead of buying insurance from a third-party.

There are multiple types of group captives, and different captives exist to finance a variety of risks. A member-owned group captive is owned by multiple, separate organizations* who join together to buy insurance as a group, retaining and sharing risk.

*In this blog, we’ll be referring to member-owned group captives, which are owned by the participating member organizations. Another structure, called rented captives, owned by a third-party but allows other businesses to participate.

How Does Member-Owned Group Captive Insurance Work?

Think of it like a group fund, which each member pays premiums into which are used to pay claims and to operate the insurance company. Each group shares risks, but because the members of a group captive are carefully selected, only like-minded members who are carefully managing their claims and risk management are included.

This means that instead of being lumped together with organizations that have frequent claims, you are isolating yourself from the rest of the market. A prospective member with poor loss experience would not be included in the captive.

If you’re feeling lost, take a look at our deep-dive on captives, which explains the overall concept and structure of captives and will explain the variety of different types of captives.

I Have To Pay Someone Else’s Claims?

It is possible that your premium dollars could be used to pay out claims for other member-owners, but understand that this is already happening in the traditional market. When you have a good year in a captive, you could actually experience lower premiums, and members can also receive a return on underwriting profits in the form of dividends.

If you’re tired of your premiums going up year after year with little to no explanation, and you feel like you are controlling your claims without any benefit, a captive may be the right fit for you.

Are Overall Costs Lower in a Captive?

While there is no guarantee that you’ll see a short-term difference, most of our clients experience lower costs after about 3-5 years. In fact, in our experience, it’s very rare for a client who enters a group captive to ever consider leaving. Here are some of the reasons why overall costs tend to be lower in a captive:

Should I Consider Joining a Group Captive?

A group captive is not a fit for everyone: we tend to steer our clients toward the idea when they meet the following criteria:

When it comes to group captives, we find the best fit is a mid-market organization who fulfills the above criteria, though there are captives for organizations of all shapes and sizes. It will not be a fit if you experience frequent liability claims.

What Are the Benefits of Joining a Group Captive?

In addition to the advantages listed above (premiums based on loss experience, improved risk pool, access to risk management resources, return on premiums), here are some reasons to consider joining a group captive:

What Are the Disadvantages of Joining a Group Captive?

Joining a captive requires time and effort, though in our experience, the juice is well worth the squeeze. Do not think of a captive simply as insurance solution, because it’s so much more than that – active participation in a captive provides access to risk management resources, networking and benchmarking that you just won’t find in the traditional market.

However, here are some of the costs of joining a captive:

Captives for Employee Benefits

Group captives also exist to retain risks related to employee benefits. At Gregory & Appel, we have extensive experience – and great results – with clients who have moved medical stop-loss to a group captive. Captives also exist to cover health claims, dental, vision and wellness programs.

Am I Ready to Join a Group Captive?

If the advantages seem attractive to you, and you feel you may meet the criteria discussed in this blog, you may be a fit for a member-owned group captive. The next step would be:

At Gregory & Appel, we have extensive experience working with clients as they navigate through this phase of their risk management journey and beyond. We’re eager to help, so if you are ready to learn more, contact us.

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Learn More About Captives

Don’t miss the other entries in this series:

Captives 101: What is Captive Insurance?

Captives vs. Risk Retention Groups: What’s the Difference?

How Do Employee Benefits Captives Work?

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

What is Captive Insurance?

Introduction and Overview

A captive is an alternative to traditional insurance in which a company – or group of companies – provide coverage for their own risks by forming their own licensed insurance company instead of buying insurance from a third-party.

This guide will explain how captives work, the benefits of captive insurance and explain how they are structured. It will also discuss how this alternative model could help you control insurance costs. If you’re interested in taking control of your risk in a way that saves your company time and money in the long run, continue reading.

History of Captives

The term “captive” originated in the 1950s, when an engineer turned insurance broker named Frederic Reiss founded the first captive insurance company in Bermuda in 1962. Responding to increasingly high premiums, he was interested in a method of retaining and sharing risk.

He based his newly formed captive insurance company in Bermuda, the first country to formally establish legislation and oversight procedures for captives. Today, Bermuda remains the world’s leading offshore captive domicile. However, captives are quickly rising in popularity – there are also 30 captive domiciles in the United States, according to the Insurance Information Institute, and in 2022, the state of Vermont overtook Bermuda as the world’s leading captive domicile.

Today, about 90% of Fortune 500 companies have their own captive subsidiaries, with this alternative form of risk management continuing to grow in popularity each year. But they’re not just for large companies – captives come in all shapes and sizes and span across many different industries, including non-profit groups.

What Exactly is a Captive?

As we mentioned earlier, a captive is a special type of licensed insurance company, controlled by its owners, that provides coverage for their own risks. This is still insurance, and most captive members still utilize traditional insurance markets to transfer certain risks, or to provide excess coverage. It is also common for an organization to place certain lines of insurance within a captive, with others covered by traditional insurance.

The general concept is that instead of buying insurance directly from a third party, members of a captive retain costs and certain risks by contributing premiums into a fund, usually at lower cost than within the traditional market, later covering their own losses.

If there are leftover funds after each organization’s claims have been paid out, each member could receive a share of the underwriting profits. And because much of the money in the captive is being invested, including your premium dollars, the return on these investments can be significant.

Other Advantages to Captive Membership

Other advantages include the many options for self-insuring risks, particularly standard casualty lines of insurance like general liability, product liability, professional liability, commercial auto and workers’ comp. Captives can sometimes provide coverage that is not available in the private market, while also offering cost savings and more control over claims decisions. There are opportunities to lower premiums, which in a captive structure are based on your actual loss history, and to receive significant dividends on funds invested within the captive.

In the current insurance market, many organizations are finding their premiums rising year after year, and are in need of a more consistent, cost-saving solution. Rates are increasing, and underwriting is becoming more difficult. This hardened market results in smaller coverage limits and higher premiums. Forming a captive, or joining an existing one, can be a way to insulate an organization from these market factors.

Types of Captive Insurance

There are many different types of captives; they truly come in all shapes and sizes.

Here’s a helpful way to think about the basic structure of captives:

Single-Parent or Group Captives

To learn more about group captives, how they’re structured and what advantages they offer, take a look at our Group Captives blog.

Owned or Rented Captives

There are a variety of other structures and special purpose captives. Below are descriptions of a few important ones.

  1. Protected Cell Captives – Also known as segregated-cell captives, these rental captives provide insurance to organizations but their assets and liabilities remain are legally separated, and members do not share risks (or claims). Each organization has a separate underwriting account.
  2. Risk Retention Groups – an alternative risk transfer method created under the Liability Risk Retention Act in 1981. RRGs are domiciled in the United States, licensed to write liability insurance and regulated as a captive insurance company. They may operate nationwide, but must register in each U.S. state in which they will write insurance. They are treated as multi-state insurance companies. To learn more about RRGs, check out our Risk Retention Groups blog.
  3. Industrial Insured Captives a captive that provides coverage for multiple large companies, either as pure captives or group captives. (An industrial insured is a commercial insurance buyer which can negotiate contracts with insurers without the protection of insurance regulators.) The captive insures the risks of each organization, as well as any affiliated companies.
  4. Micro Captives – a small captive insurance company with a small annual written premium. Premiums are placed in an investment account and as long as the captive stays under the premium threshold, they do not pay tax on their underwriting income.
  5. Branch Captives – a unit of an existing offshore captive, licensed to operate in a U.S. state. This allows it to operate through a branch in the location where the insured risk is located, allowing companies to extend their coverage territories without establishing a separate captive in each legal jurisdiction, while also streamlining management.
  6. Association Captives – a group captive sponsored by a specific trade association within a defined industry that predates the formation of the captive by at least one year. It insures risks of members, and of the association itself. There are notable advantages to participating in a captive with industry peers. Take a manufacturing captive, for example – you are paired with organizations that have similar risks and exposures. In addition to gaining the typical advantages of captive membership, you would be paired with other safety-minded organizations and have opportunities to share knowledge that can prevent future losses.
  7. Employee Benefits Captives – in a benefits captive, employers can retain the risk of providing certain benefits for employees such as health insurance, life insurance, disability insurance and retirement plans. Instead of paying premium dollars to a traditional insurance carrier, they contribute money into a fund which is used to pay out claims. This often lowers costs, offers more flexibility in benefits offerings and offers access to risk management and decision-making tools that organizations otherwise may not have access to. To learn more about benefits captives, and to see how this differs from self-insuring, check out our blog on the subject.

Options for Captives

As you’ve just read, there are many types and structures of captives.

According to the Insurance Information Institute (Triple-I), in 2018 about 200,000 companies in the United States met the definition of a mid-sized company, with revenues between $10 million and $1 billion. These companies are best-suited to establishing a new group captive or joining an existing group captive.

Some member-owned group captives use a captive management company to manage the daily operations of the captive, but the members who serve as the captive’s board of directors are the true decision-makers. At board meetings, they vote on rules and regulations, and dictate the standards under which new members would be included in the captive.

Click to learn more about captives

How Captive Insurance Companies Are Formed and Regulated

You’ve just read about a variety of different captive structures, each of which may be the appropriate selection for an organization’s needs. While all have a few shared characteristics in common, the standards for forming a new captive, as well as the way they are regulated, depend on the type of captive as well as the location of its domicile.

Any captive would meet the following definitions:

Creating or joining a captive requires discussion and preparation from your leadership team. These are some of the considerations for an organization considering joining a group captive:

This is a condensed list of the steps that would be involved in forming a new captive. This is a much more complicated process than joining a group captive and should be reserved for large organizations with the resources to operate their own insurance company, which will likely entail hiring professionals to fulfill the responsibilities usually performed by an existing insurance company.

Key Differences Between Traditional Insurance and Captive Insurance

We’ve already gone over many of the advantages of starting or joining a captive, but here are some of the basic differences between a captive and traditional insurance.

Traditional Insurance

  • Offered by traditional, third-party insurance companies.
  • Risks are transferred to the insurer.
  • Premiums are paid to the insurance company.
  • No opportunity to gain investment income on premium dollars.
  • Limited control over policy terms.
  • Insurer assumes the risk and pays claims.
  • Premiums are nonrefundable.
  • Broader risk pool with unrelated policyholders.
  • No insulation from organizations posing high levels of risk or frequent claims.

Captive Insurance

  • Formed by a single parent company or a group of companies.
  • Risks are retained, shared and self-insured.
  • Premiums are paid to the captive insurer and invested.
  • Member-owners can receive distributions of invested income.
  • Customizable policy terms and coverages.
  • Members can earn premium dollars back.
  • Members assume the risk and pay claims.
  • Offers greater control and flexibility in risk management strategies.
  • Opportunity to join captive with organizations that have good loss history.

More Benefits of Captive Insurance

There are several ways a group captive could lower your overall insurance costs.

Benefits of Improved Safety

Sound safety practices and claims management both protect the wellbeing of your employees and are good for your business. Research and industry experience suggest businesses that invest in health and safety programs realize a tangible return. These returns stem from:

In a group captive, you’ll have access to webinars and risk control workshops that help reduce your overall risk and lower your audit factor, which in turn will help lower your premiums. 

What Are The Costs of Captive Membership?

There are some cost factors involved in forming or joining a captive.

Customization and Flexibility

Captive insurance offers more control over insurance costs, with the flexibility to tailor risk management approaches to meet the needs of the group captive. That includes the lines of insurance the captive underwrites, how money is used and its investment strategy.

There are also opportunities for captive members to access loss control and risk management resources, which may otherwise be inaccessible due to cost or availability. Because the group captive model incentivizes reducing the frequency and severity of claims, this focus on reducing losses is a constant priority. All organizations stand to benefit from improving safety and reducing claims.

Common Misconceptions About Captives

Here are some of the common misconceptions we’ve heard about captives. If you’ve had these thoughts, you’re not alone, but here we’ll address some of these concerns and explain why they may not be barriers, after all.

My company is too small for a captive.

Group captives come in all sizes and span across different industries, so your insurance spend really shouldn’t be the deciding factor. Additionally, micro captives are a form of single-parent insurance company that provides smaller organizations with the opportunity to take advantage of the benefits a captive can offer.

Footnote: IRS code section 831(b) allows small, non-life insurance companies to elect to pay tax only on their investment income, not their underwriting income. However, this has allegedly been exploited to create tax shelters disguised as captive insurance companies. While this can be a legitimate structure for a captive, the IRS has pursued litigation against groups falsely claiming this classification. Only work with a broker you trust when identifying alternative risk options for your organization.

One catastrophic loss will bankrupt the captive.

In the group captive structure, the funding system separates and accounts for both the frequency and severity of losses. A loss forecast is developed by an independent actuary, generally using a member’s previous five years of loss history, with that forecast being split between the two layers. Losses are shared and absorbed through the captive’s funding, but reinsurance still protects the captive against catastrophic losses.

I’ll get stuck paying for everyone else’s claims.

While it’s true that you may share risks with other businesses, depending on the type of captive you’re in, that won’t necessarily cost you more. The beauty of a captive is that you’re paired with like-minded peers who are all trying their best to minimize their own risk and work their own claims as efficiently as possible. Every business has bad claims now and then, but in a group captive you can be confident sharing risk for the potential rewards.

I’m worried about regulations and compliance.

Remember that a captive is an insurance company, as as you can probably imagine, this does involve some complex legal and regulatory requirements. However, this isn’t a reason to avoid considering a captive. While familiarizing yourself with these regulations is important, in a group captive, day-to-day management including regulatory compliance, audit and tax prep is supported by captive management, leaving members free to focus on what they do best. In a single-parent captive, bringing in an expert to support this function would be necessary.

Joining a captive will be expensive, and they don’t seem accessible.

In the case of a group captive arrangement, companies considering joining may need to contribute capital to the captive to help cover the risks assumed by the group, and these initial costs can be significant. However, less capital is required in order to join a group captive, and keep in mind that if you do leave the captive in the future, collateral is returned when the last policy year the organization participated in is closed. A captive is a long-term approach to risk management, and should be thought of as a full commitment.

Is a Captive Right for My Business?

Here are some of the factors that would determine whether you may be the right fit for a captive.

Additional considerations include:

Annual spend on premiums – There isn’t an exact formula to tell you whether or not you’ll be successful in a captive. However, we’ve found a good rule of thumb is that your company should be spending at least $100,000 annually on workers’ compensation, general liability and auto coverage for this type of insurance to be beneficial.

Capital commitment – Captives are built for the long haul. Typically, distributions don’t begin until 3-5 years after the end of a policy year for commercial insurance captives, though the return can be quicker for employee benefits captives. It’s unlikely that you will see an immediate return after joining a captive. This is a long-term strategy.

Risk of adverse underwriting results – It’s important for captive members to have a strong commitment to risk prevention. If loss control programs are not in place, the likelihood of claims increases and will negatively impact the captive as a whole, because you are retaining and sharing risks. And if risks are not accurately accounted for in underwriting, the captive may not be prepared to pay out claims. That’s why captive members are required to provide a detailed loss history before being accepted into the captive – a group arrangement will not accept poor risks.

Time commitment and related costs – While there is an investment of time and resources related to participating in a captive, if you’re thinking along those lines you are asking the wrong question. What you should be wondering is what benefits this investment will have for your organization. The answer is an increased focus on risk management and loss prevention, savings on lost time claims, fewer worksite accidents, and over time, lower overall insurance costs.

Tax treatment – This is NOT an investment or a way of receiving tax benefits. Captives are strictly an insurance product. Whether or not they offer tax benefits for your organization should be determined by a CPA or qualified tax attorney.

Captive Insurance Frequently Asked Questions

To recap what you’ve just read, here are some of the questions we get most often, answered in simplified terms.

How does captive insurance work?

A captive is an insurance company that provides insurance to, and is controlled by, its owners. There are many ways to structure captive insurance companies, and they come in all shapes and sizes. A captive insurance company retains the cost of risk through the captive that is usually transferred to traditional insurance companies.

What are the disadvantages of captive insurance?

Captive insurance is a long-term risk management strategy which is unlikely to provide financial benefits within the first 3-5 years. There are starting costs involved in capitalization, with collateral being required to start or join a captive. Some risks are a better fit for a captive arrangement than others.

What are the benefits of captive insurance?

Captive insurance can result in lower premiums, because they are based on a projection of future losses based on your five-year loss history, not on the variety of factors outside your control that impact traditional insurance premiums. Being part of a captive can provide more control over claims, access to risk management resources and more customization and flexibility than traditional insurance. You can also earn money on premiums and other funds which have been invested, whereas in a traditional arrangement you’ll never see those dollars again, no matter how well you can avoid claims.

What is the purpose of a captive insurance company?

A captive insurance company exists as an alternative to traditional insurance. Instead of transferring risks to an insurance company, in a captive, certain risks are retained by the captive. Premiums are calculated based on loss projections, using historical claims data to predict potential future losses, among other factors. Captives also provide opportunities to share retained risks with other captive members, so each member’s risk exposure and loss experience impacts the captive.

Why do companies form captives?

Captives allow companies to have more control over their risk management strategy and insurance costs, improved cash flow and greater flexibility in coverages. They can also directly benefit from having favorable loss experience, as their premiums are determined by their future loss projections, among other factors. With high premiums in the traditional market, and organizations feeling like they have little to no control over the market factors causing the rise in costs, a captive is a solution that provides protection, while also offering an opportunity for members to gain back premiums in the form of investment income.

What types of coverage do captives provide?

Captives exist to insure a wide variety of risks, most often for conventional coverages like general liability, product liability, professional liability, commercial auto and workers’ compensation.

Captives also can be used for specialty risks that are hard to find coverage for. Examples include:

Captives also exist to retain certain risks related to employee benefits, such as medical stop-loss, health claims and more.

Should I Consider a Captive?

Almost every time one of our clients gets into a captive, they tell us they wish they would have done it sooner because the captive’s structure actually makes them a better company from a lot of perspectives – not just from an insurance standpoint.

Think about it. If you’re with a group of like-minded peers and everybody’s trying to get better, you’re sharing all of these ideas and best practices that can help transform you into a better company. And that’s just one of many examples of how captives can help elevate your business. 

So certainly, you should consider it. Start having those internal discussions with your leadership team. And let us know when you’re ready to get started.

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Learn More About Captives

Don’t miss the other entries in this series:

What is Group Captive Insurance?

Captives vs. Risk Retention Groups: What’s the Difference?

How Do Employee Benefits Captives Work?

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

The Risk Lab Podcast #3: Healthcare Compliance For Employers w/ Stacy Small & Kylie Fields

In The Risk Lab Podcast, we speak with insurance industry professionals and subject matter experts to examine the wide world of insurance and risk management.

In this episode, hosted by Gregory & Appel president & CEO Andrew Appel, we discuss the current state of the employee benefits market with special guests Stacy Small and Kylie Fields.

Stacy Small is a senior vice president and benefits consultant who has studied the industry from the ground up and has nurtured a love of collaborative client relationships and complex compliance issues along the way. Never one to shy away from legalese, Stacy leans into developing legislation to understand how it affects benefit plans and her clients’ strategy. 

Kylie Fields, J.D. is a compliance specialist taking the employee benefits world by storm. Kylie is a master of communication and dreams of equipping every client with the legal know-how they need to sustainably grow and prosper.  With a seat on several committees across the industry, she is armed with the latest information on all things legal and compliance. 

Andrew Appel, president & CEO of Gregory & Appel, invites colleagues Stacy Small and Kylie Fields onto The Risk Lab podcast to discuss the current state of the employee benefits market. Discussion topics include what’s new in compliance, how to handle the Mental Health Parity and Addiction Equity Act (MHPAEA), tips for HR pros in staying up to date with compliance changes, how your healthcare plan should handle GLP-1s and much more.

To subscribe to G&A’s weekly Legal & Compliance newsletter, click below:

Click the timestamps below to open the YouTube video in a new tab, and the video will jump to your selected topic. Don’t forget to ‘Like’ the video and ‘Subscribe’ to our channel – more episodes are coming soon!

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

Employer Healthcare Spend Expected to Rise in 2024

The largest increase in U.S. employer healthcare spend may be coming in 2024, according to an article from Reuters. Citing multiple industry studies, average costs paid by employers are set to increase over 8 percent with medical inflation, demand for weight loss drugs and availability of other costly therapies among the factors driving these costs.

In this article, we’ll take a look at some of the trends in healthcare spending that are driving these rising costs, as well as ways to mitigate them.

Mental Health

41% of U.S. adults experienced high levels of psychological distress at some point during the pandemic, according to four Pew Research Center surveys conducted between March 2020 and September 2022.

Nine out of every 10 adults said they believe there’s a mental health crisis in the United States, according to a CNN report from last year.

And an NPR report from last week reported that roughly two-thirds of Americans with a diagnosed mental health condition were unable to access treatment in 2021, even though they had health insurance.

It is essential that we continue to address mental health by increasing access to treatment, promoting awareness and supporting initiatives that prioritize mental wellbeing. Employers are expected to continue expanding access to mental health support and services while reducing barriers to care.

Pharmacy Spending

An uptick in speciality drugs, especially those meant to treat diabetes and support weight loss, is the lead factor in growing pharmacy costs. GLP-1s (glucagon-like peptide-1 receptor agonists) have had a significant impact on healthcare costs for many U.S. employers, a trend which is sure to continue in 2024. These drugs, designed for patients with type 2 diabetes, improve blood sugar control by stimulating the body to produce insulin after eating.

They can also lead to weight loss. As GLP-1s become approved as weight loss medications without a Type-2 diabetes requirement, employers should be actively considering how they will approach these prescription drugs.

Woman getting prescription filled at pharmacy

According to Truveris, the size of the GLP-1 market is expected to balloon from $22 billion to $72 billion between 2022 and 2032. A Reuters article estimated the impact of these drugs: pharmacy benefit costs increased 8.4% year-over-year in 2023, compared to a much smaller 6.4% increase the year before.

Most employers are looking for more transparency when it comes to pharmacy benefit management (PBM) pricing. According to The Business Group on Health’s survey, 92% of employers are concerned about high-cost drugs in the pipeline, and 73% say finding more transparency when working with pharmacy benefits managers is a priority.

Health Care Delivery

The popularity of on-site clinics and access to virtual care is likely to be another continuing trend, which can also be a cost saver for employers.

By reducing the number of trips to urgent care facilities or even visits to a primary care physician, employers can reduce costs. The emphasis on preventative care and removing barriers to healthcare through on-site clinics and virtual health platforms can result in earlier intervention and prevention of chronic conditions. By encouraging regular screenings, vaccinations and wellbeing programs, these interventions can help identify health issues at an early stage when they are easier and less costly to treat.

It should be noted that while these practices became much more common in the days post-pandemic, it seems these practices may be leveling off in 2024. According to The Business Group on Health, roughly half of employers (53%) offered on-site clinics in 2023, with approximately the same figure is expected to do so in 2024. Because many employers have migrated to a hybrid or remote work environment, the need for health services at the workplace is no longer growing.

Final Thoughts

Rising costs are likely to continue to impact employers into the new year. However, by focusing on improving health outcomes and increasing access to mental health support and preventative care, employers can mitigate some of these costs. Work with your Gregory & Appel benefits consultants to devise strategies to offer great care, minimize increasing costs and provide benefits that attract and retain talent within your organization.

The Risk Lab Podcast #2: State of the Personal Insurance Market w/ Pat Schaefer & Leslie Appel Maher

In The Risk Lab Podcast, we speak with insurance industry professionals and subject matter experts to examine the wide world of insurance and risk management.

In this episode, hosted by Gregory & Appel president & CEO Andrew Appel, we gauge the state of the personal insurance market with special guests Pat Schaefer and Leslie Appel Maher.

Pat Schaefer is a private client advisor who delivers a tailored client experience to successful individuals and families. Pat’s clients appreciate his ability to understand their complex assets and risk, all while discovering what matters most to them.

Leslie Appel Maher is a vice president & private client advisor who enjoys transforming anxiety over life’s everyday risk into confidence in living with the proper plan. With the passion she brings to the table, she also brings empathy, knowledge and responsiveness in a way that makes complex conversation easier. 

Gregory & Appel Insurance president & CEO Andrew Appel invites colleagues Pat Schaefer and Leslie Appel Maher onto The Risk Lab podcast to discuss the current state of the personal insurance market. Discussion topics include the increasing cost of premiums, high national expense of weather-related claims, the impact of litigation on the insurance market, what to expect at renewal, and how working with your risk advisor before filing a claim could save you money.

Click the timestamps below to open the YouTube video in a new tab, and the video will jump to your selected topic. Don’t forget to ‘Like’ the video and ‘Subscribe’ to our channel – more episodes are coming soon!

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

30 Quick Tips For Winter Weather Preparedness

December 21 marks the first day of winter. With cold and snowy weather approaching for much of the United States, this is a great time to take stock of some important safety tips for the months ahead.

In this article, we’ll divide our focus into three very important areas for winter weather safety: preventing slips and falls, driving safety and cold weather preparation for your home. For each of these areas, we’ve provided 10 simple tips for the winter months ahead.

Preventing Slips

The CDC reported that about 1 million U.S. adults are injured due to slips and falls each year, while the U.S. Bureau of Labor Statistics reported over 20,000 occupational injuries related to ice, sleet and snow.

Here are ten tips for reducing the risk of falls on slick surfaces this winter.

Vehicle Safety

Snowy, icy road surfaces contribute to a high volume of car crashes and injuries each year. Take a look at the tips below to reduce your risk and travel safely this winter.

Home Safety

Cold weather isn’t just a hazard for slips and vehicle crashes, it can also pose a threat to your home. Here are some tips for avoiding frozen pipes or other winter weather related claims, as well as some additional items for your winter checklist.

We hope you found these tips to be helpful. Follow this guide and you’ll be on track for a safe winter. Spring weather will be here before you know it!

This article was produced in a partnership with KPA.

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

The Risk Lab Podcast #1: State of the Commercial Insurance Market w/ Kari Sandifer & Tyson Vaughn

The Risk Lab Podcast is a new show where we speak with insurance industry professionals and subject matter experts to examine the wide world of insurance and risk management.

In this episode, hosted by Gregory & Appel president & CEO Andrew Appel, we gauge the state of the commercial insurance market with special guests Kari Sandifer and Tyson Vaughn.

Kari Sandifer is an account executive who has a passion for growth – not only in her personal life, but also for her clients. She is driven by her steadfast determination and the desire to help her clients overcome risk management challenges. Kari has over 15 years of experience in property & casualty insurance, working with clients in construction, distribution, real estate development, hospitality, manufacturing and more.

Tyson Vaughn is a vice president & commercial risk advisor with a long history of risk management education up his sleeve and informed business decision making in his DNA. Tyson is energized by getting to know his clients’ hopes and fears so that he can help them assess opportunities and protect them against any subsequent risk. He has over 20 years of experience in the insurance industry, specializing in four key sectors: manufacturing, real estate development, not for profit, and ski areas.

Andrew Appel invites Gregory & Appel Insurance colleagues Kari Sandifer and Tyson Vaughn onto The Risk Lab podcast to discuss the current state of the commercial insurance market. Discussion topics include increasing premiums, rising replacement cost appraisals, the increase in frequency of catastrophic losses and alternative risk.

Click the timestamps below to open the YouTube video in a new tab, and the video will jump to your selected topic. Don’t forget to ‘Like’ the video and ‘Subscribe’ to our channel – more episodes are coming soon!

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.

Conquer the Stresses of Open Enrollment With These Tips for HR Pros

Open enrollment season has arrived for many U.S. companies, and if you are responsible for managing your organization’s benefits program, you already know how stressful this time of year can be. The tasks and responsibilities involved with guiding your colleagues through this process can unfortunately have a major impact on your physical, mental and emotional health. And you know that each year presents its own unique challenges.

To help benefits administrators navigate this challenging period, we have some guidance for promoting your overall wellbeing throughout the open enrollment timeframe.

Recognizing Signs of Stress

If you’re an HR pro, you already recognize the stresses and challenges that come with your role. This time of year, it can feel like a whirlwind of stress and pressure — you’re searching for candidates to fill an open role, dealing with the demands of leadership and trying to build and maintain a great organizational culture, all while juggling the challenges of open enrollment.

A recent survey found 98% of HR professionals have felt burned out at work in the last six months, while a separate survey reported that 43% consider planning or managing benefits to be one of the most stressful parts of their job.

Dealing with stress is impossible if you can’t recognize the differences between routine challenges of the job and feeling truly overwhelmed. Some of the short-term warning signs of excessive work-related stress can include [1]:

If you don’t deal with stress, the long-term impact on the body and mind can be even more significant [2]. Each of the short-term issues listed above can lead to more serious health issues over time. For example, difficulty sleeping for months will greatly impair your body’s ability to heal and recover. High blood pressure could lead to heart attack or stroke. Chronic stress can even impair your immune system, causing you to be more susceptible to illness [3].

It often seems those who help others have the most trouble asking for help themselves. In the next section, we’ll cover some techniques and practices to help manage work-related stresses.

Managing Stress

In the moment, it’s easy to get caught up in trying to solve a problem, even when you may not have an immediate solution. That feeling of being overwhelmed can be a lot to handle. There is no one-size-fits-all approach to managing stress. Understand that the guidance below can provide benefits, but what works for you may not work for another.

Use Your Support Network
Remember that you are not alone, even when it may feel like it, and that the best solution to dealing with stress is working with others to solve the problems causing tension in the first place. Any problem can seem overwhelming when you don’t see a clear solution. But sometimes, just talking through a challenge with a trusted colleague or even a loved one can provide clarity and give you an opportunity to view a setback with a little more insight.

Practice Self-Care
Self-care takes many different forms, but regardless of how you like to relax and pamper yourself, it’s important all the same. It doesn’t have to be a spa day or lighting candles by the bubble bath. Maybe it’s taking a weekend trip to see family or just spending time with friends at a concert or sporting event. Whatever it is that brings you happiness and gives you a break from the stresses of your personal or professional life, make sure you take the time to invest in yourself.

Exercise
Exercise has been proven to help manage both acute and chronic stress [4]. It has also been shown to cancel out some of the long-term effects of stress, such as a diminished immune system [5]. It also provides a break from stressors and an opportunity to recharge while your mind is focused on your workout or activity.

It’s important to find something you enjoy doing — if you don’t enjoy running, for instance, a 30-minute jog will probably just stress you out even more. Know your strengths and interests, and try many different things to find an activity that suits your preferences.

Mindfulness
Mindfulness is the ability to be fully conscious and aware of where you are, what you’re doing and taking the time to process your surroundings instead of being reactive [6].

Think of a time when you’ve experienced a setback or hurdle and reacted with frustration. Mindfulness is when we seek balance in those moments and experience them rationally, not emotionally. When we are mindful, we are able to reduce stress, enhance our performance, gain insight and have awareness of our own wellbeing.

Studies support this practice: reframing your thoughts can help you reduce stress. Next time you find yourself feeling overwhelmed or reacting strongly to a setback, try to take a moment to process these feelings logically, rather than emotionally.

Box Breathing
This yoga technique is employed by many athletes and is even incorporated into training for Navy SEALs. It could also be considered a form of mindfulness. The practice is simple; do each of the following while slowly counting to four.

Repeat this several times, giving focus and attention to your breathing. Studies show that regulating your breath can lower levels of the stress hormone cortisol and reduce heart rate because it activates the parasympathetic nervous system, controlling the body’s ability to relax.

Regulating your breathing can have a calming effect, and directing your mind to focus on the four-count, as well as feeling the air enter and exit your body, can take your mind off external stressors. Practice this skill: working on it can prepare you to experience its benefits in times of hardship. It can even be a great practice to calm down and evict busy thoughts before bed.

Taking Breaks
Knowing your own best practices for productivity at work can present its own unique challenge. No matter your preferences, one thing is certain: taking breaks can not only improve your mood, it can make you more productive in the long run [7].

Being able to detach from a project and return to it later with renewed focus and energy can help you secure wins throughout the day, instead of feeling the burden of responsibilities piling up. In today’s connected world, it’s also likely you’ve felt pressure to be “on” evenings and weekends. You need to be able to detach from work in your down time, your mental health depends on it. Prioritizing breaks, downtime and setting boundaries can have a profound effect on your wellbeing.

Journaling
Writing down your thoughts and feelings can help you be more aware of underlying beliefs and behaviors. Taking time to digest events in your life can help you define them more clearly and bring meaning to them. It can also help you resolve feelings lingering in your mind, and sometimes even uncover thoughts or beliefs you weren’t consciously aware of. Take time before bed or after a busy day at work to record thoughts and occurrences. It could even just be as simple as making a list of things you accomplished that day, versus fixating on items left unfinished.

Remember, You’re Not Alone

Remember that all across the country, there are HR pros like you feeling the same stresses related to open enrollment. It’s normal to feel overwhelmed from time to time, but that doesn’t mean you’re helpless. While it’s just about impossible to completely avoid work-related stress in any profession, hopefully these tips can help you now and in the future. You’re not alone — and open communication with your support network, practicing self care and being aware of your emotions can go a long way towards lowering your level of stress.

This content is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice. Gregory & Appel is neither a law firm nor a tax advisor; information in all Gregory & Appel materials is meant to be informational and does not constitute legal or tax advice.