Within the past year, all Florida substance abuse treatment centers have felt the pain of holdbacks from major insurance carriers. Unfortunately, reimbursement amounts are likely to decrease and holdbacks are likely to become increasingly common.

Despite these challenges, many operators continue to be driven by a passion for helping people successfully achieve a full recovery while they continue to operate profitable businesses.

For many treatment centers, self-insuring is a practical means of protecting their current and future outlook against increasing regulation and decreasing their dependence on health insurance carriers.

In order to self-insure, the treatment center owner would create an insurance corporation of which they own 100 percent. Then, the treatment center would pay adequate premiums that are justified by the risks that exist in the business. The premiums are tax deductible as an ordinary deduction (a maximum of 39.6 percent) to the treatment center and not taxable to the insurance corporation. Down the road, if a treatment center no longer feels the need to self-insure or makes an exit from their business, it can take a distribution from its insurance corporation. That distribution would be taxable at a favorable capital gains rate (20 percent).

An advantage of this strategy is that, if health insurance carriers hold back significant revenues, a self-insured treatment center will be able to make claims to their own insurance in order to assist in covering operating costs while they wait to be reimbursed for services performed.

Treatment centers are advised to explore this and other strategies with their professional advisors prior to implementing widespread changes. Nonetheless, taking a proactive approach to managing their business should be seen as imperative as a healthy operation is the one most prepared to assist its clientele with their long-term well-being.

For questions or comments, contact Steven Friedman at sfriedman@dbllp.com.