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The nation's first group health insurance captive, formed as a result of special enabling legislation in Maine, is flourishing while controlling health care costs for its 50 employer members through value-based purchasing and an emphasis on wellness and disease prevention.
While numerous group captives have been formed in various U.S. domiciles to provide stop-loss coverage to self-insured employers, the Maine Wellness Association Captive is the first of its kind formed to provide primary health care coverage to employer groups.
Unlike a multiple employer welfare arrangement, which is governed by the federal Employee Retirement Income Security Act, the Maine Wellness Association Captive is state-regulated. As such, it provides coverage for all state-mandated benefits, but also meets minimum essential benefit requirements of the Patient Protection and Affordable Care Act.
“Although we're structured as a captive, we are following all the same guidelines as an insurer,” said Art Batson III, chief financial officers and owner of Falmouth, Maine-based John Lucas Tree Expert Co., one of the initial captive members, and chairman of its board of directors. “We're the only association captive in the country that is doing health. It's like a trust. It's just a different legal instrument. But to join the captive, you have to have Maine operations.”
The health care captive was made possible as a result of a 2011 amendment to Maine's captive law that state lawmakers passed at the urging of employers, said Eric Cioppa, the state's superintendent of insurance.
“The groups approached the legislature to change the statute,” Mr. Cioppa recalled. “We didn't have a lot of competition in the small-group market.”
Because many of the health care captive's founding members had succeeded in lowering their workers compensation costs via self-insurance, they wanted to replicate that success in health care, Mr. Cioppa said.
“We have one of the biggest self-insured workers compensation markets in the country,” with nearly half of Maine employers self-insuring their occupational exposures via multiemployer trusts, he said.
Rather than forming a trust, the employers chose the captive route because it was not governed by ERISA and required lower startup costs, said those involved in the captive's formation.
Since its Jan. 1, 2012, inception, the captive has grown to include 50 employer members, which collectively provide health coverage to 4,500 employees and their dependents, said Joe Edwards, a former Maine insurance regulator who was instrumental in getting the captive formed and now serves as its president.
Captive executives say they are keeping cost increases at or below market levels. There are no initial capital requirements to join; employers pay a $100 annual membership fee to belong to the wellness association. Then, depending on their size, employers pay premiums for the captive's health insurance program, “MaineSense,” based on their group's claims experience or a community rate based on employee demographics.
Employers determine their own plan's benefits and employee premium contributions. The captive picks up claim costs up to $500,000 per individual, with specific stop-loss coverage purchased from Pembroke, Bermuda-based PartnerRe Ltd. covering the rest, Mr. Edwards said.
The captive has succeeded in limiting members' rate increases through value-based purchasing via direct contracts with health care providers and by emphasizing wellness and disease prevention, Mr. Edwards said.
For example, the captive contracts with an imaging center normally closed on Saturdays to provide mammograms and colonoscopies to plan members at a fraction of what they would cost during the week, he said.
“We also are bringing health care to the worksite,” Mr. Edwards said. “We had two guys who hadn't been to the doctor in 30 years. So we brought the doctor to them” by providing biometric screenings and worksite medical care.
“We call it Triple Aim,” Mr. Edwards said. “The No. 1 priority is better health for employees. No. 2 is a better health care system. We think if we do those two things, there will be better costs,” the third prong of the plan.
So far, the captive is achieving that goal, said Joel Allumbaugh, president of the Hallowell, Maine-based National Worksite Benefit Group, who has been a consultant to the captive since the startup.
“It has performed equal to, if not a little bit better than, the market,” he said. Also, “with employer committees active in developing policy and changes to improve the program to suit the wants and needs of its members, it's also delivering a unique and beneficial experience” to captive members and their employees, he said.
Special trusts called voluntary employees' beneficiary associations, long used to fund long-term disability and other employee benefits, have become a way for financially troubled employers to shed their retiree health care liabilities.