What’s In It For Me?

Risk Retention Groups and Healthcare.

High healthcare cost is the biggest plague on American pockets! From the cost of operation, to service, to coverage, there is no bottom to this money hole. Companies across the land are using all forms of creative collaboration to try an effectively and efficiently address healthcare needs. From giant corporations like Amazon, Berkshire Hathaway and JP Morgan teaming up to form their own healthcare company, to Walgreens and CVS partnering with existing healthcare coverage providers like Aetna and others. The need for provision of affordable healthcare for employees is an exponential concern for employers. One option that worth further investigation in the current climate is Risk Retention Groups (RRGs).

RRGs allow self-insured employers to shield themselves from high unexpected cost they may incur while trying to fund their own health benefits program. RRGs were created to address the lack of affordable liability coverage in various special industries like health care. Participating employers own and fund the RRG. Many employer’s fund a retained amount and claims cost that are above their retention are then reimbursed by the RRG. Risk Retention Groups often have access to and do purchase reinsurance to cover losses above an agreed upon threshold. Reinsurance may be provided by a traditional carrier or captive insurance company. The use of an RRG provides better spread of risk between participants. It’s also an accessible option for smaller businesses who may not have the ability assume their own risk or unable to do so affordably.

Risk Retention Group owners have complete control over the program. They retain underwriting profits that are gained from positive risk management. As the RRG surplus grows, reinsurance needs change and may result in further cost reduction. For a healthcare RRG to be successful there are some key operating factors that need to be in place. They should include; continuous capital contribution, a prominent level of operational efficiencies, proficient actuarial and underwriting practices/professionals and “best in class” providers, program managers and their party administrators.

Employers are always on the lookout for new and innovative ways to provide quality healthcare benefits to their employees. Uninsured and/or unhealthy employees because of overbearing cost has a negative effect on the workforce at large. Most workers in America access healthcare through their employer’s program, making it a benefit of significant value. The health of the workforce directly impacts the profitability of an organization, thereby making it a significant investment for employers. An RRG is an option for employer participants to join forces, knowledge, and resources that may very well improve their bottom line.