A captive insurance company is an insurance company wholly owned and controlled by the insured and specifically designed to insure its owner’s risks. Naturally, captives are a valuable form of insurance coverage for the healthcare sector, as it comes with a number of unique risks, and healthcare costs can be great.
One variety of captive insurance that has been relevant to the healthcare field is Medical Stop Loss captive insurance. In the 2016 Marsh Captive Benchmarking Report, it was reported that medical stop-loss is one of the five fastest-growing lines of business for healthcare captives. This is due to the move towards population health management for healthcare providers, which will likely shift their profit and loss statements to being more in line with those of multi-line insurance companies. Because of this medical stop-loss captives will be a better fit to protect healthcare providers due to their self-funded employee medical plans, accountable care organization contracts, owned health plans, and other aspects of medical stop-loss protection.
It is also important to understand a few things about the legislation surrounding healthcare captives. In December 2015, Barack Obama signed into effect the Protecting Americans from Tax Hikes Act of 2015, and this bipartisan bill introduced a number of benefits to the healthcare sector and their captives. Specifically:
- Under PATH, business owners with captive insurance companies were able to write-off up to $2.2 million in pre-tax revenue for the year 2016, leading to $1.3 million in tax savings
- PATH extended over 50 expired provisions of the tax code as well as alterations to tax compliance and administration; specifically, it modified section 831(b) of the Internal Revenue Code to raise the cap on premiums for captive insurance companies from $1.2 million to $2.2 million
- PATH also altered a provision related to captive insurance companies; instead of paying premiums
Ultimately, these changes as a result of PATH proved to be beneficial for healthcare businesses looking to create healthcare captives, as they provided benefits in the forms of taxes and premiums.
About Caitlin Morgan
Caitlin Morgan provides a broad range of captive insurance solutions which we are happy to review with you in detail, and we are happy to help you determine whether a captive is right for your organization. Give us a call at (317) 575-4440 to learn more about our solutions.
Sources: Marsh, Becker’s ASC Review