Baptist Health to insure in-house

Subsidiary set up to manage costs

Baptist Health of Little Rock, which owns eight hospitals in Arkansas, has created the first captive insurance company in the state, the state Insurance Department said Tuesday.

The insurance company, Diamond Risk Insurance LLC, is a subsidiary of Baptist Health.

A captive insurance company is created to insure the risks of its owner. Baptist Health, which has about 8,000 employees in Arkansas, will use Diamond Risk to provide insurance coverage for Baptist Health, such as general liability and workers' compensation insurance, said Bob Roberts, an executive vice president at Baptist Health.

Property and casualty insurance and other business coverage may be added in the future, Roberts said.

Diamond Risk Insurance will not provide health insurance for Baptist Health's employees, Roberts said.

Baptist Health is part owner of Health Advantage, which provides health insurance for the health care system's employees, Roberts said.

The new subsidiary is "a natural progression of a risk management program as our company has gotten larger," Roberts said. "This was a next step from self-funding some of our risk management costs and putting it into our own company."

Baptist Health hopes that with the change its costs will level out over the next few years, Roberts said.

"Now, we're relying on how the insurance market overall is going," Roberts said. "We hope we'll be able to continue to improve our risk management program and have it reduce costs."

What separates the captive insurance company from other self-insurers, said Ryan James, spokesman for the Insurance Department, is that a captive insurer is organized under Arkansas law and regulated by the state Insurance Department. Other self-insurers are regulated by the federal government.

"By creating its own captive insurance subsidiary, Baptist Health reduces its dependence on the year-to-year volatility of purchasing insurance on the commercial market," Arkansas Insurance Commissioner Allen Kerr said in a prepared statement.

James was unsure if other Arkansas companies are considering creating similar insurance structures.

"We would hope that because Baptist has such a reputation across the state that other companies in a similar position would take a serious look at it," James said.

Business on 01/27/2016

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