Senior Professional in Human Resources (SPHR) Certification Practice Exam

Why are employers shifting to health insurance captives?

1. It can control costs of health insurance.

2. It allows employers to purchase stop-loss insurance for larger claims.

3. Claims data is more controlled and thus utilized to make decisions about benefits.

4. All of the above

The correct answer is: All of the above

Employers are increasingly shifting to health insurance captives due to several interrelated benefits that captives provide. A primary reason is the ability to control costs of health insurance. By pooling resources with other employers within a captive, organizations can share risk and leverage collective purchasing power, which often leads to reduced premium costs over time. Moreover, captives allow employers to purchase stop-loss insurance for larger claims, meaning that if a single employee's claims exceed a certain threshold, the captive can protect the employer from excessive financial loss. This aspect of captives helps manage the financial risk associated with high-cost healthcare claims, making it a more sustainable option for employers. Additionally, having a captive insurance arrangement means that employers have more control over claims data. This access allows them to analyze this data more effectively and use it to make informed decisions about benefits and health management strategies tailored to their workforce. This data-driven approach enables employers to identify trends and implement programs aimed at improving employee health and reducing overall costs. Thus, the combination of cost control, risk management through stop-loss insurance, and better utilization of claims data highlights why captives have become an attractive option for employers looking to enhance their health insurance offerings and manage their healthcare expenditures more effectively.