Physician-Owned Captive Insurance Companies on the Rise

Physician Owned Captive InsuranceIn response to the passing of the 2010 Patient Protection and Affordable Care Act and its expansion of risks imposed on the medical community, physicians have increasingly turned to alternative forms of risk management to cover these expanding range of risks. A captive insurance company is often found to be a superior option.

Why Physicians Form Captives?

Given the continued environment of escalating premiums for less coverage, many physicians are choosing to take charge of better managing their risks. Today, high-income physicians are finding that owning their own insurance company (called a "Captive" insurer) can be an effective and profitable component of their overall business strategy. In fact, owning a captive insurance company may be one of the best risk management and wealth planning tools available to physicians.

How Do Captives Work?

Captives can provide a platinum level of coverage to a medical practice, imaging center, operator, durable medical equipment supplier, ambulatory surgery center, or other ancillary healthcare businesses, while allowing the physician-owners to benefit from the profits of the insurance company in a highly tax efficient manner. Captives help control the rising cost of insurance paid to conventional insurers, provide added insurance protection by filling in the gaps and exclusions of conventional policies, and provide coverage for what is currently self-insured or non-insured risk. Other ancillary benefits can include income tax savings, asset protection, and estate-tax mitigation.

What Do Captives Insure?

Many physicians unknowingly self-insure a wide range of risks, including change in insurance reimbursement rates, the costs of CMS and insurance company audits, the risk of delisting. malpractice deductibles, changes in government regulations, professional liability, employment practices, accounts receivables, administrative actions (such as HIPAA), disability, loss of business license or professional license, and business interruption, among others. A captive also allows its owners to use specifically tailored and customized policies that are often too expensive or unavailable through the conventional insurance markets.

A Captive Is A For-Profit, Tax-Exempt Insurance Company

Captives are usually tax advantaged, for-profit insurance companies. Provisions under the IRS code have been in place before 1920 encouraging the formation of tax exempt, small insurance companies, with annual premiums under CURRENT_PREMIUM_CAP million.

Captives Are Common

Captives are ubiquitous among Fortune 1000 companies and are among the most attractive risk planning tools available to middle market businesses. Through Capstone, a captive can put physicians in better control of their insurance coverages and the claims paying process.

Own Your Own Insurance Company

Since 1998, Capstone Associated Services, Ltd. together with their affiliated law firm, The Feldman Law Firm LLP, have formed and operated captive insurance arrangements for physician-owned businesses. Capstone is Houston-based, with offices in Delaware and in the British overseas territory of Anguilla, where many of its clients' captives are domiciled.
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