To say the health insurance agency is in a state of change is an understatement. Recent changes to the Affordable Health Care Act and Medicare leave employers with a choice. One, continue on the path they’re going, which means a possible increase in premiums. Two, find an alternative. Those who look to find a way to keep employees while lowering their costs have selected number two.
And there are alternatives out there. The most feasible is captive insurance. This is a form of insured policy not regulated by the government. It doesn’t compete with the large health insurance companies. Instead, captive insurance is owned and run by the employees who invest. As a comparison, think of it as an organization which offers private stock.
Larger companies can invest in captive insurance programs due to their available capital. However, small and mid-size businesses may not have this ability. Not all is lost. What they can do is create micro captives.
The concept of a micro captive has been around for decades. During the healthcare crisis of the late 1970s, businesses of all sizes began to work with their employees on this concept. They felt a private insurance where everyone decided on coverage and rates was the best course of action. This has stuck for over 30 years.
Previously, a micro captive was designated as an organization with annual written premiums of less than $1.2 million. In 2017, the IRS amended this rule to increase the value to $2.2 million.
Here’s how a micro captive works. The control is not by a large corporation. Instead, it is from the owners. This is not a proxy like whole life insurance. Policy owners help shape programs and determine rates. In turn, they can customize their own policies as well. And, because they’re also investors, they receive regular dividends.
How do you know if a micro captive is a good decision? The best thing to do is talk with an organization like CaptiveResources. If they have a positive and long-term track record, then they can provide the advice you need. Don’t be afraid to ask any and all questions. First, they are more than happy to answer them. Second, the more you know, the more comfortable you’ll feel. And this means investment into a micro captive won’t be as scary as you once thought.