Executive Director MAPP
I vividly recall the exhilaration of my first job as a paper boy at 12 years old. My mornings began before dawn, delivering the Fort Wayne Journal Gazette to over 100 homes, ensuring that my customers could enjoy their morning coffee with the latest news. The role was physically demanding; I had to retrieve bundles of newspapers from a corner drop-off, carefully fold and rubber-band each one, and place them precisely where each customer preferred – under the door mat, next to the flagpole and so on. Each month, I would knock on doors to collect payments for the next four weeks, providing tiny tickets as proof of payment.
Unbeknownst to me at the time, this early experience with financial responsibility would impart a crucial lesson: the power of compounding. I remember eagerly anticipating my monthly bank statements, marveling at how my savings seemed to grow without any additional effort. As a child, I imagined that the bank was simply “giving me money.”
While the joy of seeing my savings accumulate through interest was thrilling, I’ve since learned that compounding has a darker side, especially in the realm of inflation and rising business costs. Today, businesses face the compounding effects of inflation, which erode profit margins and squeeze employee wages. The annual rise in prices is challenging enough, but the compounding effect – where this year’s inflation sets the stage for next year’s pricing – poses a serious threat to small businesses and broader economies alike.
This is pertinent, particularly for business leaders grappling with the escalating costs of healthcare insurance. The top five largest insurance providers have seen their revenues grow by about 15% annually. For manufacturing companies, regardless of size, combating this price escalation through fully insured or self-funded plans is increasingly impractical.
It’s time for manufacturing leaders to understand why many Fortune 500 companies have shifted away from traditional employer-sponsored insurance (ESI) in favor of insurance captives. Well-structured captive insurance programs offer greater control over financial resources, improved predictability in renewal rates and enhanced transparency – advantages that traditional insurance models often lack.
A prime example of success with captives is the Manufacturers Association for Plastics Processors (MAPP) insurance program, called CAPTIV8. Plastics manufacturing business leaders using CAPTIV8 are not only outpacing inflation but also have reversed the negative compounding trend that occurs in the insurance market. Over the past three years, the CAPTIV8 program achieved a 3.77% decrease in compounded renewal rates, while traditional ESI programs experienced an increase of 25.80%. * This demonstrates nearly a 30-point difference between innovative vs. traditional approaches to funding healthcare insurance.
As Author Darren Hardy aptly put it, “The Compound Effect is the principle of reaping huge rewards from a series of small, smart choices.” Conversely, the opposite effect – demonstrated annually through rate increases passed down by the large health insurance conglomerates – can be detrimental.
MAPP’s Health Insurance Captive Program illustrates the potential for insurance captives to counteract the detrimental effects of inflation. By adopting this approach, businesses can achieve greater cost stability and control, ultimately benefiting both their bottom line and their employees.
* Three-year trends extracted from MAPP’s annual Health and Benefits Reports
