Surplus captive plans must be considered by healthcare sector


The sharp increase in mergers and acquisitions (M&A) activity in the healthcare sector has been widely debated and as systems come together, consideration needs to be given to surplus captives and what to do with them.

That is the opinion of panellists at the Cayman Captive Forum who looked at the various issues that typically arise during the post-acquisition phase.
Mergers don’t always mean closure for the extra captives according to Julie Robertson of law firm Honigman.

She explained there might be a need for two captives, such as one for taxable risk and one for tax exempt risk or a captive for hospitals and a separate one for physicians.

When the captive vehicles are being evaluated it provides a great opportunity to learn from the other vendors, noted Mike DeWitt of Tenet Healthcare.

Scott Beckman of ISMIE Mutual said the push by management to consolidate and get things done quickly can be challenging. In terms of red flags to watch out for, there needs to be a good handle on underfunded liabilities in order to move forward and any holes in insurance coverage need to be plugged.

Once the letter of intent is signed and issues come up, Beckman said unless it’s going to rock the organisation, he wouldn’t bring it up and would deal with it post-transaction.

“Mergers are exciting but it is hard for a lot of people whose relationships are going to change,” Beckman added. “Loyalty is important and if I am not familiar with a particular vendor I still think they should have the opportunity to show what they can do.”

Robertson added: “People are very invested in their captive and proud of it. When acquiring organisations and coming together I think it’s nice to recognise and appreciate those people.”

Cayman Captive Forum, Mergers & Acquisitions, Julie Robertson, Scott Beckman, Honigman, US