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  • Writer's pictureLucas Nava

Everlong CEO on captive insurance: "The real reason they were doing this is for the employees"

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Captive insurance company Hylant Global Captive Solutions offered captive insurance as a potential solution for the current critical state of the health insurance industry in an article published through on August 22.

The industry has seen a massive rise in medical malpractice claims in recent times. Malpractice victims were paid approximately $42 billion from 2010 to 2019, and the number of verdicts in excess of $25 million tripled from 2014 to 2018. 33% of medical malpractice claims from 2013 to 2017 were due to diagnosis errors, 24% were due to surgical errors, and 14% were due to improper treatment.

"The health insurance carriers, they have no problem at times paying those high claims because they can turn around and say, 'Well, we got to raise the premiums, look at all this money going out the door,'" Everlong Captive CEO and Founder Doug Truax said in an interview with Illinois Business Daily. "And then, there’s been times where... some brokers have been like, 'Hey, this is great. The premiums went up, so did my compensation.' And so, we had this really vicious cycle that was going on and the cost had just continued to escalate over the decades here. And, it’s horrible for the employers."

Captives, which are insurance companies specifically created for a like-minded group of insureds, have been used by health care groups such as Everlong Captive since the 1970s to assist with lessening and mitigating financial risks. Providers often seek the aid of captives to address unexpected liability claims and large increases in commercial insurance costs. Captives are also able to provide more control, more predictable pricing, and more personalized coverage options.

Unlike traditional insurance companies, which treat premiums as expenses, money paid towards a captive is treated as an investment used for paying claims. If the amount of claims is lower than what was expected, and if reserves are smartly invested, the captive's owners can benefit from any underwriting profit and investment income, or even lower future years' premium contributions.

Despite all of the above, however, Truax believes that "the real reason they were doing this is for the employees".

Currently, health care captives now make up approximately 14% of all worldwide captives, writing over $3 billion in premiums every year.

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