Though captive health insurance is not required to meet the federal regulations of the Employee Retirement Income Security Act (ERISA) of 1974, as amended from time to time, it does allow for those funds saved to be placed into such programs for the employees.
"Getting the product right doesn’t solely mean improving upon certain widgets and technologies. Rather, it’s about meeting the consumer where they are in a way that understands their needs," Everlong Captive Health Insurance said in a blog. "You have to take the blueprint and adapt it to your own model. And that’s what we’ve done. At Everlong, we reimagined and redesigned the current captive model used in the business liability world, modified its structure and improved its performance, enabling us to turn back the tide of ever-increasing medical insurance costs caused by lack of control and transparency."
Captive health insurance is classified as a form of self-insurance, which was included in the ERISA preemptions, making captive health insurance not required to meet ERISA regulations.
"Self-insured trust is a fund set up by an employer or group of employers to pay for employee welfare benefits," an OLR research report stated. "Self-insured plans generally do not have to comply with state insurance laws. However, if the self-insured trust is under a multiple employer welfare arrangement, the plan is subject to all state insurance laws and regulations."
"ERISA was passed to protect employees by providing minimum standards for employee benefits and granting access to courts to enforce the terms of the employee benefit programs. ERISA was also intended to unify the standards and rules for employee benefit programs in order to encourage employers to offer benefits. While ERISA regulates retirement benefits and pensions, this issue brief addresses only its relationship to health benefit plans and state laws that address health system transformation," a CDC white paper said.
Captive health care insurance helps to provide employers with a safeguard that caps the insurance rate cost. Health care captives now constitute for 14% of the worldwide captives, writing more than $3 billion in premiums annually, according to Captive.com. The use of captive health care insurance, like that of Everlong Captive Healthcare Insurance, allows for employers to mitigate the financial risk, while providing greater troll through predictive pricing and tailored coverage options.
According to Spring Consulting Group, medical stop-loss, a part of the captive health insurance model, is not subject to ERISA either, but is very popular to add to policies due to it helping prevent going over a certain amount on claims. But, captive health care insurance models can help to fund ERISA benefits.
"Life and Disability plans are usually ERISA in nature. These plans are subject to federal oversight, under the auspices of the Department of Labor (DOL) and require express approval from the DOL to fund them in a captive," according to Spring Consulting.
"There has been increased interest in funding employee benefits through captive insurers in the past few years. A major impediment, however, has been the federal law regulating employee benefits, the Employee Retirement Income Security Act of 1974 (ERISA) and the restrictive interpretation of its provisions in the case of captive insurers by the Department of Labor (the “Department”)," the Groom Law Group wrote in a blog post.
In 2018, the U.S. Department of Labor (DOL) issued its final rule on association health plans (AHPs) of "Employer" under Section 3(5) of ERISA—Association Health Plans. It ruled that AHPs permits "small employers and self-employed individuals to join together in purchasing health insurance," Captive.com noted.
This ruling meant that those operating in a captive cell can purchase health care coverage as one group and still be covered within the confines of ERISA for those who do not choose to fund an ERISA account with the profits received back by being a part of a captive health care insurance cell.