AZA works with corporate structures to develop captive insurance companies to insure the risk of health insurance to employer groups.
Corporations use captives to insure their business risks.
For example, one captive we formed was under Tennessee legislation. The captive performs the operations of the insurance company, including underwriting, issue, policyholder service, claim payments, reinsurance negotiations and preparation of financial statements. Captive managers are employed to manage the relationship with the regulatory authorities and perform many of the daily activities.
The benefits of using a captive include the following for self-funded health plans:
- Cost reduction
- Coverage will include certain risks that regular insurance may not be available and exclusion of mandated benefits
- Captive owners obtain a tax-deductible expense for the reserves
- Captive can establish their own underwriting rules and should obtain better claims experience and obtain and improve the quality of the insurance risk.
- Reinsurance is used to limit the captives risk
In developing the captive AZA is responsible for performing feasibility studies that include the pro forma financial projections. This measures the future profitability of the business, revenue, investment income, claim forecasts, based on benefit plans designs, reserve estimates, operating expenses, stop-loss reinsurance and taxes.