Marsh: healthcare plan providers should consider a captive

According to Marsh a challenging insurance market has weighed heavily on healthcare plan providers, many of which saw significantly higher rates, stricter terms and conditions, and several coverage restrictions, especially for their errors and omissions (E&O) coverage. Increased antitrust litigation and greater regulatory oversight of health plans have created further pricing and coverage challenges, and even led to some insurers exiting the market.

As market conditions became more challenging, many healthcare plan companies were faced with limited options to insure their managed care errors or omissions (MCEO) risks. Some opted to increase retentions. Others explored alternative risk transfer methods, including captives, to transfer their risks in a more cost-effective way that would also provide increased control over the risks they wanted to transfer or retain.

Captives are frequently used as a solution to challenging short-term market conditions. However, as Marsh points out, companies may be reluctant to set up a captive without a longer-term strategy due to the required financial and operational investment.

Marsh said that a captive can deliver other benefits to healthcare plan providers, including the ability to be more agile in changing the way risks are insured, the ability to script bespoke coverage and the potential to invest in ESG and other initiatives.

For more information contact Marsh.