Twenty-two colleges, universities, and educational institutions own Educators Health, LLC (edHEALTH), a healthcare collaborative formed to address rising healthcare costs that were straining school budgets. By bypassing commercial insurers and pooling resources, edHEALTH leverages the combined schools’ purchasing power, thereby saving on healthcare costs for faculty, staff, and family members. But, did you know that edHEALTH’s wholly-owned subsidiary, Educators Health Insurance Exchange, is a group captive insurer?
The captive insurance company’s main purpose is to insure its own risk. By joining colleges and universities together as a single purchaser, the schools gain market leverage. The captive manages its own risk through claims management, innovative programs aimed at loss control, and collaboration with strong business partners.
Here are the ABCs on how the Educators Health Exchange captive works:
A – Advantages Include Variety of Savings Opportunities and Flexible Plan Designs
- Potential short and long-term cost savings – the larger group means better pricing and less volatility. The group purchasing power provides low negotiated Third Party Administrator (TPA) fees, transparent broker payments, and reduced Affordable Care Act (ACA) taxes.
- Risk financing options – member schools pick their own self-insured retention level based on their risk tolerance, philosophy, financial status, and experience.
- Improved cash flow – every year, each member school gets to keep the amount in their claims account if the school’s claims are less than the amount paid into the account. Unlike fully insured plans, schools aren’t paying profits on top of claims; it’s their money to use for future claims. Additionally, if the captive has a surplus at the end of the year, each member school receives an allocation based on the school’s and captive as a whole’s experience.
- Customized employee benefit designs – unlike other group funding options, our captive arrangement offers flexible plan design options. This allows edHEALTH to offer a variety of plan design options to meet the needs of our members.
B – Business Partners add Strength to the Organization
edHEALTH and its captive couldn’t operate without the benefit of its relationship with strong business partners. Each business partner provides unique expertise that benefits member schools, the edHEALTH organization and its captive:
- Third Party Administrators – negotiate contracts with providers, process claims in compliance with edHEALTH plan designs, and offer top-notch customer service to member school employees and their family members.
- Captive Manager – manages the day-to-day functions of Educators Health Exchange, serves as the primary contact with regulators, ensures compliance with regulations, provides insurance and risk management know-how, and produces financial statements and reports.
- Actuary and Underwriting Consultant – through analytics, the actuaries manage the financial security of the captive. Underwriters evaluate each member school’s risk profile, plan designs, and risk tolerance to develop the working rates.
- Auditor – monitors loss reserves, reserves adequacy, and reviews the actuary’s assumptions and calculations.
- Attorney – makes sure that the captive satisfies all IRS requirements, and advises edHEALTH on how to respond to any audits and enforcement actions.
- Investment Advisor – provides expertise on investment strategies and timing of investments that align with claims cash needs.
- Re-insurer – limits the potential loss to edHEALTH and our member schools from high-claimants
C – Collaboration among Member Schools is Beneficial and Fun
One of the most popular aspects of being part of the edHEALTH Captive is collaboration. Member schools meet often as part of the Plan Design and Comptroller groups. They compare cost utilization, trends, and best practices. This rapport leads to sharing ideas at meetings and outside of scheduled events.
The icing on the cake is the annual edHEALTH Walking Challenge that gets the competitive spirit in high gear. Wentworth Institute of Technology took home the prize in 2019. Stay tuned to find out which school will win the 2020 edHEALTH Walking Challenge Trophy.