Dive Brief:
- More employers are using a "captive" approach as a strategic tool to manage risk and benefit costs proactively, as well as analyzing claim data to identify and address key cost drivers, according to Yahoo Finance.
- A new study by Willis Towers Watson found the primary driver for nearly half (44%) of companies with employee benefits in their captive (an alternative financing vehicle that sidesteps insurance carriers) is to control and improve their claim data to help with ongoing cost management.
- That is a healthy rise from 24% in last year’s WTW study. Interestingly, the survey found the percentage of employers that cited cost savings as the main driver for using captives dropped from 67% in 2015 to 44% in 2016 – an indication that their use is about more than cutting costs.
Dive Insight:
Mark Cook, director at Willis Towers Watson, in fact, said there has been a clear evolution in the rationale for companies to include employee benefits in their self-funded captives. He explains that while saving money was the initial objective, many smart employers are taking their use to the next level by finding additional benefits.
Besides healthcare, the study found that 50% of those polled use their captive vehicle to provide death and disability benefits too.
While captives are only one option in trying to reduce healthcare and other benefit costs, it looks as if employers are starting to get creative when using them. The good news is smaller employers today can go the captive route (basically self-insuring) because of new programs.