The inception of the Clinically Integrated Captive

As the cost of providing medical benefits and health insurance continues to increase, the popularity of employer self-funding and medical stop-loss initiatives continues to be among the insurance industry’s most significant growth segments.

Over the past several years, the healthcare industry itself has evolved to introduce more effective approaches to the cost and quality of care delivery. Unifying the core elements of medical stop-loss, cost containment, and more accountable healthcare delivery has led to the development of a new and highly responsive approach to medical stop-loss group captives.

The latest evolutionary progression comes from partnerships with regional health provider systems sponsoring proprietary group medical stop-loss captives that feature deep and proprietary procedural and facility discounting within the mix of other cost reduction initiatives.

Promise Health, in collaboration with stop-loss underwriter MSL Captive Solutions and captive manager Risk Partners, has developed the Clinically Integrated Captive (CIC), a provider-sponsored medical stop-loss captive.

This is believed to be the US’s first platform for healthcare provider organisations and small-to-medium-sized employers that will provide the ability to collaborate through a captive vehicle. This model will produce less volatile self-funded plan results and deliver a real step forward in enhancing the patient experience, stabilising stop-loss rates, and reducing the ultimate cost of care.

Improving the delivery model

Many captive sponsors have seized upon the opportunity to make incremental enhancements to the captive framework—primarily focused on member experience, health benefits navigation, advanced underwriting methodologies, and clinical cost-containment strategies. These initiatives reduce the volatility of self-funding, which in turn has incentivised more employers to move into self-funded arrangements that they previously might not have considered.

Yet the data remains unclear in terms of measuring the overall impact of such programmes on the total cost of care, which is the actual index of success for any self-funded employer. This is not to say that reducing annual increases or potentially eliminating new lasers is not advantageous for employers. Instead, is the impact of these initiatives enough to make the captive a long-term, sustainable vehicle of value?

To impactfully reduce the total cost of care, captives must have influence and control over clinical utilisation trends and procedural unit costs. Appropriate leverage is not attainable through traditional leased provider networks, high-level, value-based incentives, or episodic clinical point solutions. This level of influence and control requires a layer of clinical integration between the captive and the healthcare delivery system. This integration is based on shared economics, whereby the healthcare provider is financially better off by keeping the captive members and the beneficiaries healthy.

Too often, the healthcare sector shields innovative models to enable commercialisation and first-mover advantage rather than creating an open-source, transparent solution for all to review, critique, and use. Yet it is only the latter approach that will allow the healthcare industry to realise its sector-wide mission of better managing the cost of commercial health insurance in the US.

The Promise Health CIC

Prisma Health, an 18-hospital health system in South Carolina, will service a geographic area within the Columbia, South Carolina, to Greenville, South Carolina corridor. The Promise Health Plan is domiciled in South Carolina, primarily due to the progressive vision of the South Carolina Department of Insurance and the leadership of its Captive Division.

The core principles of a CIC platform:

1. Geographically focused—a service radius managed by an integrated network of providers ensures appropriate clinical access for all plan members.
2. Employee density—captive members must have sufficient mass within the given geography of the healthcare provider network sponsoring the CIC in order to leverage the savings associated with scaled cost reductions.
3. Value-based foundation—the network of providers must be empowered to influence the primary sources of clinical transformation and egregious financial incentives and to evolve remuneration mechanisms and clinical decision-making at the point of care.
4. Provider-led clinical management—the provider network must support the overall management of the clinical quality of services and the cost of those services, as they have the most persuasive influence for managing these factors across the spectrum of claimants.
5. Progressive stop-loss carrier—the carrier must understand the mechanics of the healthcare provider network and its ability to manage high-cost claimants so as to provide appropriate underwriting credit to the CIC members.
6. Shared economics—the healthcare delivery system must have a shared economic interest in preventing avoidable over-utilisation, primarily used to offset the “demand disruption” that the CIC will create in avoided interventions or interventions in lower-cost care settings.
7. Patient & member navigation—stepping beyond traditional benefit navigation tools and moving to achieve favourable patient care outcomes in a cost-efficient manner.
8. Clinical data underwriting—leverage available clinical data on employer cases to a) help create higher confidence in pricing; and b) enable a pathway for evaluating fully-insured cases that do not have access to historical experience.

Promise Health plans to share more insights and data surrounding the success and learnings of the CIC model—specifically as it relates to improving quality of care, member and provider experience, and the ability to reduce the total cost of care sustainably.

We are currently working with several other health systems across the nation that wish to replicate this innovative model, the collective data from which will be aggregated into a broader dataset and used to inform all interested parties.

Looking to the future

The impact of CICs is predicated on developing a strategic alignment with regional health plans. The more widespread a healthcare system’s geographic service radius, and the more comprehensive the service or procedural offerings, the more impactful the CIC can be for its members. The greater the extent of the healthcare service spectrum that a health system can provide in a geographic region, the more influence it will have over procedural pricing in that area.

As a result, bigger health systems have been acquiring or merging with smaller systems and independent specialty practices at a record rate. This allows the healthcare system to expand its service radius and increase market control within all phases of healthcare. Since healthcare systems have been among the most active industries in terms of merger and acquisition activity over the past decade, we expect that many more will focus on the development of proprietary health plans, especially CICs.

A new captive insurance era is upon us, and the CIC will play a strategically focused, highly transparent, and influential role in the increasingly progressive evolution of the medical stop-loss captive industry.

Jeb Dunkelberger is the chief executive officer of Promise Health Plan. He can be contacted at:  jeb.dunkelberger@promisehealthplan.com

Phillip Giles is managing director of MSL Captive Solutions. He can be contacted at: phillip.giles@mslcaptives.com

Gary Osborne is vice president of Risk Partners. He can be contacted at: gosborne@riskpartners.com