Consortium vs. Captive: Is There A Difference?

By: Matt Carta, CSFS – Sales Director

In 1991 Benecon created the concept of consortium programs for employers to fund their health benefits. By leveraging the power of group purchasing while each group maintained their own individual funds and picked their own plan designs, employers were able to create lasting savings and control over their healthcare plans.

Today, Benecon’s VERIS Consortium is the nation’s largest and offers a way for groups in every industry and every state to effectively manage their healthcare spend and help employees satisfy medical expenses. With countless health plan options on the market we’re often asked how the consortium model compares to these options, specifically to captive programs.

A captive health insurance plan, or captive, is a type of self-insured health plan created by a company or group of companies.

However, there are some major differences and important advantages that differentiate the consortium model.

Our rate caps apply to total plan liability, not just stop loss premiums.
1. 1. In a captive health insurance plan, aggregate factors are generally uncapped. For employers under 500 enrolled we see this as a differentiator as aggregate volatility is real in smaller populations. In VERIS we cap overall plan liability, not just stop loss.

1. 1. Overall liability matters!
      1. In conjunction with how our rate caps apply to overall liability, we can protect groups from volatility when it does occur on the aggregate level (long term approach vs. reactive).
   2. For fully-insured clients looking to switch to self-funding, we can focus on the benefits of self-funding and projecting expected costs, but limit total plan liability making the conversion to self-funding easier in the first year.
   3. 20 or 25% corridors work well for larger employers, but may not be palatable to the smaller end of the market where aggregate liability is even more volatile.
   4. For clients that want to take more risk, or are self-insured today, we can offer the same 20-25% corridor while offering more in protection.

1. 1. Groups in captives tend to like the captive layer as it offers a “return”. In practice we believe our clients can utilize their dollars better elsewhere – investing in their own business etc. There is no collateral required to join VERIS.
   2. The captive layer creates a shared layer of risk for captive members. While it’s unlikely in most cases, if a captive pool is small and the captive layer is exhausted it can expose membership to calls for funds, or risk in general if the captive performs poorly.

1. 1. This eliminates gaps in stop loss contracts altogether, so if a stop loss claim hangs on for an extended period of time liability is not transferred to the client.
   2. This also means groups are not purchasing a tail policy every year that they may or may not use. We believe this is more efficient and cost effective strategy in the long run.
   3. If groups want tail liability coverage we can offer it if they return to an insured policy.

1. 1. VERIS has a full financial staff built to provide consolidated billing that allows groups to fund “at max” on a monthly basis. This allows groups making the transition from a fully funded arrangement to maintain consistent cash flow practices year to year.
   2. Groups in VERIS may also “pay as they go”. Most captives only allow this option. This can be cash flow intensive for some clients and administratively cumbersome as claims need to be funded on a weekly basis.

To summarize, on the surface a captive health insurance arrangement and the consortium model are quite similar. Both offer an avenue for employers to self-fund a health plan, and offer protection through leveraging membership purchasing power. However, when we dig deeper, the VERIS/Benecon model offers some unique advantages on protection, contracts, and funding solutions relative to the Captive method. When groups perform well, both models will have similar pricing and equal upside. In years of poor performance, the VERIS model offers more in protection with an important focus on overall liability.