When the predominant insurer of rural hospitals left the state, one community’s healthcare provider was in serious trouble.
This healthcare organization faced large increases in medical liability premiums, as well as the reality of what those increases would mean for its hospitals and doctors. If the company couldn't find an insurance carrier willing to carry its risk at an acceptable price, its operating costs could become prohibitive.
Seeking an independent perspective
Milliman consultants were brought in to help the healthcare organization weather the crisis. The consultants performed a retention study and ultimately recommended the creation of a captive insurance company.
The captive program enabled the healthcare organization to form its own insurance subsidiary, allowing it to manage its own risk and finance its retained losses in a formal structure. This captive insurance company would afford the healthcare organization significant benefits. Some of the advantages included potentially accruing tax deductions, lowering insurance costs, improving cash flow, and giving control of underwriting, rates and forms, claim settlements, and investments back to the parent company. Also, by utilizing a captive strategy, the healthcare organization could retain premiums and investment income, and future profits could be distributed back to the organization. The healthcare provider would now hold the reins to more of its business, affording it the independence to carry—and even benefit from—its own risk.
Ensuring local access to healthcare
By providing an intelligent, independent analysis of the specific needs and variables affecting this healthcare organization, Milliman consultants were able to design a customized solution. Milliman evaluated the risk that a captive insurance company would create for the organization and helped the client prepare for the future. Most important, Milliman consultants helped keep critical healthcare services right where they’re needed: nearby.
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