Captive Cost Components

A Group Captive Solution for Small and Medium-Sized Groups Maximum Cost Summary

Captive Cost Components

Your Maximum costs are made up of three components:

1. Claims Fund

This is the variable portion of a level‐funded health plan and is where most cost savings occur.
Each group is individually underwritten, and the claims funding is based upon the group’s risk. If the claims funding is not fully utilized during the plan year, the excess funding can be used to offset increased costs in the following year. You will never have to pay more in claims than the maximum amount.

2. Stop-Loss Coverage

There are two components of stop-loss included in a level-funded health plan, specific and aggregate stop loss. Specific stop-loss protects the group from an individual member’s “specific” claim above a predetermined amount. If an individual claim exceeds the “spec” level, the insurance picks up the cost above a predetermined amount, i.e., $25,000.Aggregate stop-loss pays all claims that exceed your group’s maximum liability. Both forms are part of your level‐funded health plan and are included in the maximum costs for the plan year.

3. Administrative and Sales Cost

Covers your level-funded health plans administrative and sales expenses. Inclusive of billing, claims processing, underwriting, clinical care coordination, customer service, PPO fees, claims to report, and compensation for the broker and their role in establishing the plan.

Captive Dividend Opportunity

Groups participating in the captive are required to “Buy-In.” The buy-in cost is approximately 10% of the first year’s stop-loss premium. The buy-in provides additional excess coverage by increasing the captive’s claims reserves.
Insurance contracts within the captive are set by the individual group and can be any term available in the commercial Stop Loss market. Physicians Collaborative Health’s standard terms for the first year will be a 12/18 contract,with the second year a 24/12 contract. Contract terms are available on a one-off basis, 24/12, 12/12, 12/18, or 12/24. Dividends are determined after the calendar year plan ends and run-out is complete. In the case of 12/18 contracts, claims accounts are generally reconciled in the 20th month with any dividend distributed in the 21st month. Dividends are “per capita,” based on the number of a group’s enrolled members and the number of months of participation in the captive during the previous plan year.

Example: The Captive has 500 enrolled employees. Company A has 100 lives enrolled with an effective date of 1/1. After run-out, Company A is eligible to receive 20% of the total captive dividend.
The Captive has 500 enrolled employees. Company B has 100 lives enrolled with an effective date of 12/1 after run-out Company B is eligible to receive 1/12th of 20% of the total captive dividend.