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ver the past four decades, captive insurance has proved its value to various segments of the healthcare industry. Since         medical professional liability captive in the mid-1970s, a


strong case can be made that both the evolution and the availability of           


From the late 1980s with physician groups and continuing in the 2000s with nursing homes, medical care providers encountered a professional liability crisis resulting from a rise in the frequency and the cost of            management strategy for medical providers. As opposed to insurance companies with an unfailing eye on achieving the lowest claims cost possible, healthcare concerns with captive platforms found themselves  between settling or litigating claims.





         mergers and acquisitions. Hospitals acquiring physician practices are establishing or expanding captives as part of the rollup process. In addition, physicians and practices have teamed up to form large provider groups,  


            


While the ACA has greatly contributed to a new era of consolidation, it should be noted that some acquisitions and mergers can be delayed           or practice group with a high frequency of claims for professional liability        expense to a cost prohibitive point.


FINANCIAL METRICS MATTER


 


• Annual business insurance premiums; and • Overall annual facilitation cost for the captive.


While there are some variations depending on industry, a good candidate for a captive insurance platform is a group or company that typically pays in the neighborhood of $300,000 in premiums per year for its current commercial coverage, and the organization should have better-than-average claims experience for its industry. In addition to premiums, the group or company utilizing a captive must be prepared


to cover claims administration fees, actuary fees, captive manager fees, audit fees as well as premium and income taxes.


          management program, captive platforms provide an opportunity to leverage premiums in a manner that is not available through traditional commercial insurance. By minimizing claims against the premiums paid, those entities utilizing captive insurance platforms can realize additional cash savings that can be accessed for future use or investment.


Establishing a captive insurance platform requires detailed planning and a commitment by the organization. A captive insurance start-up also needs cash on hand. Organizations have to be able to initially capitalize the captive insurance program, and funding has to be present to continue to operate through the years.


  start-up funding needed to establish a captive in the state of Tennessee. A captive insurance program in Tennessee is generally going to require an   up to $80,000-plus to facilitate the setup with a feasibility study and the  actuarial study, which has to be performed in order to establish premium funding levels needed to pay claims and operate the captive.


GAINING IN STRENGTH AND ACCEPTANCE


Given that 15 percent of the captive platforms in the world are related to  organizations is a resounding ‘yes’.


It is well documented that the healthcare industry became a prime


 response to the parade of legal action has been one of exponentially  with trial lawyers actively soliciting claims from residents’ families, found  healthcare industry.


The impact of the litigation action within healthcare was so powerful


 has become problematic. In fact, healthcare providers with low claims           commercial insurers.


    primary or excess layers of insurance through a captive, organizations again are in a position to realize savings, provided the claims experience is less than the amount of premiums paid. Healthcare providers using captive structures may be required in some cases due to regulation or contractual requirements to use an arrangement called ‘fronting’ to achieve a captive structure.


Annual 2014 | HEALTHCARE RISK MANAGEMENT REVIEW | 71


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