Shift Shapers Podcast

17 Feb 2020

Ep #301: Bail Out of the Fully Insured Jail with Captives – with Jim Hoitt

David Saltzman 0 Comments

In this episode of the ShiftShapers Podcast, host and Chief Transformation Strategist David Saltzman is joined by Jim Hoitt, Senior Vice President at Captive Division at Berkeley Accident & Health.

Jim shares his in-depth knowledge and insights into the world of Captives and discusses its 2 models and the nature of each. He also takes a deep dive into the kinds of companies that benefit the most from a Captive, from their shared goals to the ideal company size to their financial commitments.

But Jim also discusses the major plus sides to the arrangement which include providing the best healthcare for companies at a lower cost, absorbing losses and mitigating risk factors to help ensure success across models. He also explains the key role an adviser plays in all of this and how the ultimate goal is to provide guidance and filter the best-fit companies.

What You’ll Learn From this Episode:

  • 03:35 Explaining the 3 layers: Retained, shared & risk transfer layers
  • 06:34 The heterogeneous vs homogenous models
  • 10:25 Company profile: Who benefits the most from Captives?
  • 15:27 Starting a Captive arrangement
  • 18:24 The adviser’s role in starting a captive


02:14 “A Captive health arrangement is a financial arrangement for which an employer that decides to self-fund their health plan, buys medical stop-loss to back stop the assets of the health plan and then forms or joins a captive and the captive acts as a reinsurer to that medical stop-loss. Ultimately, what it creates is a kind of called financial envelope that wraps around the health plan and collaborates and shares with a number of employers to give them a mitigation to the concept of self-funding.”

02:49 “A Captive is a financial mechanism where a non-risk taking entity, an entity that doesn’t typically take risk, can participate and share in risk as if they were an insurance company. And when we talk about benefits captives, we talk about the ability to use medical stop-loss to participate in a Captive and provide a number of different financial values for the health plan.”

07:56 “They (heterogeneous model) don’t necessarily need to be like-minded in the benefit offering, in the co-pays, in plan designs, in the third party administrators and the PBM that supports the plan, but they should certainly like-minded and consistently focused with the other members on the results they’re seeking and the willingness to collaborate and have better results and ultimately provide great care but manage the cost across the health plan.”

08:34 “On the homogenous model, there is certainly an immediate affinity amongst the members. It’s our direct opposite. We’ve got a number of employers that are in a same industry for potential purposes. We’d also say there’s some homogenous to when we have a number of employers that are in one particular regional area and they share a community in terms of a greater community in terms of employment and a town and a particular part of a state, for example purposes.”

17:32 “I’d say those two elements, being focused on self-funding, having a clear risk management vision, and then then the third element, I would say, would be that they need to kind of be all in. They need to have somebody at their agency, whether it’s themselves or a part of their team that is really the quarterback on this because it’s certainly not the easy button. The easy button is still fully-insured.”

20:15 “If we do think of the Captive as essentially a bank account that allows funds to come in across a spectrum of employers, allows losses to seed in across those same spectrum of employers and allows those employers to then participate in the remaining premium balance. Or the opposite side of it. If there was some additional needed funding for it, they share in that risk together. That’s the mitigation that helps their health plan.”

22:50 “I think the first step is to consider what it is about that particular employer that makes them a good fit for it so when we kind of sort out the employer type is, do they have a willingness to treat their health plan as if it were another portion of their business, to treat it as if it’s something that really… that they can impact and want to be involved with? So I think it’s making sure that the employer is the right characteristics for the program.”

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