Employer Consolidates Health Plan with Alternate Funding
A retail distributor with eight branches in three states had been sponsoring three health plans, each separately rated and managed by an HMO. Costs of those plans were expected to increase 24%.
Company goals were to:
- offer the same benefits for the same cost to all employees in all locations
- explore self-funding for its health plan
- decrease costs
The client had found that local brokers were not able to effectively consolidate benefit plans across state lines or access necessary data to evaluate self-funding. Large national consulting firms deployed only junior resources, who were inexperienced in managing interstate benefits.
The Liberty Advantage Solution:
As a partner, we went into action by first meeting with the client and listening to its goals and objectives to gain a thorough understanding of business needs, company culture, and budgetary constraints. We committed senior experts, who developed short- and long-term plans and were responsible for strategy implementation. As a licensed broker in multiple states, Liberty was able to effectively manage the consolidation.
We analyzed the benefits and costs for each of the three plans to create a consolidated option that took advantage of the client’s collective size. It included a Consumer Driven Health Plan (CDHP) with a Health Reimbursement Arrangement, along with a traditional PPO option that offered employees a choice with costs similar to their previous coverage. Liberty also educated the client on the CDHP, along with self-funding options to consider in the long term.
To help ease the transition, a senior member of our team, who understood both the plan changes and the client’s culture, actively participated in educational meetings at all eight client locations. This full support and service were part of Liberty’s value.
After the fully insured consolidation, our team also began analyzing the claims data to assess opportunities for additional savings. After the second year of plan consolidation, the client was faced with a 25% increase from its insurance carrier. Fortunately, we had already been looking at alternative funding methods, educating the client about the advantages of self-funding and illustrating the potential cost impact by structuring the appropriate stop loss levels.
First-year participation in the CDHP plan was 50%. With the successful plan implementation, the client saved 14% in overall costs the first year, and with a favorable loss ratio, experienced a 0% rate increase the second year. The total premium savings for the client in year one was 200% greater than Liberty’s annual fees, providing an excellent value-to-cost ratio, supported by excellent services and results that exceeded client expectations.
The client's decision to provide the consolidated plan achieved goals by:
- providing the same benefit options to all employees throughout the multi-state company
- providing premium savings
- offering a Health Reimbursement Arrangement
- added incentives for employees to maintain good health
By implementing a self-funded plan for this 400 employee life group, we projected a total plan cost reduction of over $600K for their first year self-funding with a net savings of $240K over a two year period. At the end of their first year of self-funding their actual costs were running 23% lower than projected, with the additional savings flowing directly to their bottom line. The end of years two and three they had trend increases to their health plan.