Baptist Health creates state’s first special captive insurance company
by January 26, 2016 9:02 pm 481 views
Baptist Health has created Arkansas’ first special purpose captive insurance company, Diamond Risk Insurance, which was approved Tuesday (Jan. 26) by the Arkansas Insurance Department.
Bob Roberts, Baptist Health’s chief financial officer, said Diamond Risk will provide general liability insurance, worker’s compensation, property and casualty insurance. Baptist Health has long self-funded those insurance services – saving money to pay smaller claims – while also paying premiums to handle catastrophic coverage. Now, it’s created its own insurance company to handle those smaller claims. Roberts said managing its own company will help Baptist Health levelize its costs rather than having to respond to market fluctuations.
“Instead of using that money to pay premiums to someone else, we’ll have the funds in our own company, and we think that will help lower our costs over time,” he said.
No one event caused Baptist Health to make the move. Instead, it’s part of a natural progression as the system has grown and as it has considered ways of managing risk, he said. Other hospital systems across the country have captive insurance companies.
The change does mean that if there’s a loss, Baptist Health will have to absorb it.
“The risk is on us now,” he said. “There’s more risk on us, but we believe we’ll be able to manage that risk effectively and continue to control our costs. We’ve worked on ways to make our environment as safe as possible for a long time.”
Self-insured companies traditionally have been regulated under the federal Employee Retirement Income Security Act (ERISA) of 1974. This is Arkansas’ first special purpose captive insurance company, meaning it will be regulated by the Arkansas Insurance Department, said Ryan James, AID communications director.
That means customer complaints can be handled through AID, not the U.S. Department of Labor. Also, unlike with ERISA, the state of Arkansas can collect a premium tax on the insurer.
“This is actually something that Commissioner (Allen) Kerr would like to see a lot more businesses consider,” James said.