Captive Insurance Experiences Growth in Employee Benefits Industry, Provides Long-Term Savings to Employers

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Traditionally limited to large corporations and specific lines of insurance, captive insurance structures have expanded to small and mid-size companies and a wider range of risk transfer areas in recent years. As with CypressCap from Cypress Benefit Administrators, group captive insurance is becoming increasingly prevalent in the employee benefits industry as a means to offset rising healthcare costs.

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With healthcare rates escalating so significantly from year to year and no way to predict if or when they will stabilize, employers are really feeling the pressure. They are being much more proactive about implementing effective cost containment measures.

While the majority of Fortune 500s and many large corporations have relied on captive insurance structures for decades, this method of self-insurance has been expanding to small and mid-size companies in recent years for both the public and private sectors. Statistics show that captives are also becoming popular in a much wider variety of insurance lines.

One industry where captives – an alternative risk transfer (ART) vehicle – have experienced significant growth is employee benefits. Much like CypressCap, a captive insurance program managed by U.S.-based Cypress Benefit Administrators, group plans that finance risk by pooling together the resources of smaller companies are increasing in scope and quantity.

According to Tom Doney, president and co-founder of Cypress, lack of control is a contributing factor. “With healthcare rates escalating so significantly from year to year and no way to predict if or when they will stabilize, employers are really feeling the pressure. They are being much more proactive about implementing effective cost containment measures.” Doney says another reason for the growing number of employee benefit captives is that employers are looking for more transparency in claims handling. He explains, “In many cases, small and mid-size companies have traditionally experienced limited access to claims data, giving them less chance to implement programs or incentives that encourage employee wellness and minimize claims.”

With group and other forms of captive insurance, employers experience cost savings over the long term. They benefit from underwriting profits and tax advantages. Employers are also subject to fewer administrative fees and have increased cash flow. Additionally, captive insurance allows employers to retain investment income that would typically be paid up front to traditional insurance carriers in the form of claims and premiums.

Another difference between group captives and traditional carriers is the way premiums are determined. Doney notes, “Instead of paying a community rating based on average cost as a whole, employers’ premiums are instead calculated according to demographics, experience and risk profile.”

First used to cover predictable risk in areas such as general liability and workers’ compensation, group captives continue being formed for different coverage areas as evidenced by employee benefits.

Cypress Benefit Administrators recently launched CypressCap – a group captive insurance program designed for employers with at least 50 employees. To provide an innovative risk transfer solution, Cypress partners with A+ rated carriers as well as renowned captive management companies, networks, pharmacy benefit managers and other organizations committed to cost containment.

Since starting business in 2000, Cypress Benefit Administrators, a privately held company headquartered in Appleton, Wis., has evolved into more than a third party administrator (TPA) by pioneering the way toward cost containment in healthcare as the country’s first TPA to bring claims administration, consumer driven health plans and proven cost control measures together into one package. Its customized employee benefit packages combine an appropriate mix of health insurance options that allow for adaptability to the ever-changing healthcare environment and that make sense for employers of 50 to 18,000 throughout the United States. Cypress is committed to saving money for employers and their employees, minimizing employer risk, and making every interaction a positive one through “The Cypress Solution,” a powerful suite of wellness, decision assistance, cost management and information management tools. For more information on Cypress Benefit Administrators with offices in Portland, Ore., Omaha, Neb. and Pueblo, Col., visit http://www.cypressbenefit.com.

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Lori Van Handel
Willems Marketing
920-750-5020
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Tom Doney
Cypress Benefit Administrators
920-968-4613
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