Creative large companies (200+ employees) are able to find savings through partially self-insuring the employees’ medical benefits.  Using a scaled down version, Riviera Insurance Services is working with smaller employers that have less than 50 employees so they may have an affordable program that emulates some of the traits of the partially self-insured medical benefits programs.

Please keep in mind two recent studies as we further explore a new structure of group medical insurance for employers with less than 50 employees:

• A Watson Wyatt study states that 72% of plan participants incur only 11% of total healthcare spending, while 4% with chronic or catastrophic illnesses incur over 50% of all healthcare costs.
• Another study from Pacific Business Group on Health cites 50% of employees account for less than 3% of costs and 85% spend less that $1,000 per year.

With this information in mind, one option to consider is the Employer Driven Health Plan™ (EDHP) cost model developed through Ben-E-LECT. The EDHP model starts with a PPO low premium/high deductible ($2,500-3,000 range) insurance product.  The employer structures the high deductible so that the employee’s deductible and out of pocket maximum is similar to the cost of the traditional small deductible PPO plans typically offered by businesses, thus the cost to the employee remains fairly level.  The employer assumes responsibility for the majority of the high deductible for any plan participant who incurs medical expenses beyond $250-$500. 

When our Riviera team meets with a potential client, we assist management in determining if an EDHP plan is practical for that particular company. We review pricing with various premium and deductible structures, possible claim scenarios, and the cost of the Third Party Administrator (the TPA assists with claims, deductibles, and payments to insurance companies). Comparing these costs to a traditional PPO will assist in the decision making process.

The EDHP model becomes a compelling choice when the savings for expected claims usage produces a savings of 30% or more and the worst case scenario produces no more than a 5-10% cost over the traditional small deductible PPO model.

Cost, plan structure, and doctor network are also important from the employee’s perspective.  Designing the EDHP model needs to take into consideration the following for each plan member:

• monthly premium
• deductibles
• co-pays
• out-of- pocket maximum
• network of physicians and facilities

When changing to the EDHP model, employers want to make sure there is clear and timely communication with all plan participants. Both employers and employees will want to be educated on the new benefits program. At Riviera Insurance Services we work with management to assist in this communication process. Communication will include the following items:

• monthly premium
• deductibles
• co-pays
• out-of- pocket maximum
• how to process a claim
• contact information for individual assistance

The EDHP model is a creative way to combat escalating costs.  There is an immediate benefit of significant savings on the monthly premiums; a benefit that the employer may chose to share with the employees in one or more ways. (Ask us how!) Understanding that the usage of healthcare services has traditionally been low for a large percentage of plan members allows the employer to consider assuming some of the risk of a large deductible model.

Quality and affordable healthcare insurance is everyone’s goal.  At Riviera, we truly enjoy working with clients to find the right solution for each individual business.

¹Source: Watson Wyatt Worldwide, “Financial Incentives Alone Unlikely Curb Health Care Costs, Watson Says,” April 24, 2006
²Source: “PBGH Member Benefit Strategies Promoting Quality, Value and Access,” February 2005.

The true cost of care extends well beyond what someone pays out of pocket for home and facility care if they don’t have long term care insurance. There is an additional financial burden placed on today’s workforce and businesses. When parents need care, often time it’s the grown children who step into the role of care giving or managing the care needs of their parents. Of the 44.4 million caregivers, 59% of them are working aged adults.¹

Employees lose ground financially in lost wages from salary and bonus due to arriving late, leaving early, unpaid leave and missing out on training and promotions. The average working caregiver will lose $659,000 over a lifetime in wages, social security and retirement pension.²

Employers also pay a price when employees become working caregivers. This is due to increased absenteeism and decreased productivity. When caring for a family member employees are not only physically absent but mentally absent and disconnected from their work. Costs associated with lost productivity include work interruptions, family crises, absenteeism and replacing employees to name a few. On a national basis, employer costs for working caregivers range from $11.5 to 29 Billion per year.³

When you consider the net financial impact, it is not surprising that long term care insurance is the fastest growing employee benefit in America today.⁴ An increasing number of companies both large and small are offering employees the opportunity to purchase individual long term care policies. As an employee benefit, long term care insurance can be implemented on a voluntary, sponsored and/or an executive carve-out basis. Coverage is not only available to employees, but family members (spouses, parents, in-laws, etc.) can participate as well. With as many as 3 insured lives, employees & family members can receive reduced underwriting and discounted premiums, yet still have the value that individual policies offer over true group plans.

Does long term care insurance make a difference? Absolutely! Long term care provides a firewall of protection around employees’ 401(k) and retirement plans; and working adults whose parents who own long term care insurance are twice as likely to stay in the work force and have fewer social stresses.⁵ Long term care insurance helps families, working adults and business protect their bottom line against the devastation of uninsured long term care expenses.

1. Caregiving in the U.S., National Alliance for Caregiving and & AARP, April, 2004.
2. Mature Market Institute: The Juggling Act Study 1999.
3. MetLife Study of Employer Costs for Working Caregivers, 1997.
4. MetLife Study, 2005
5. The MetLife Study of Employed Caregivers: Does Long Term Care Insurance Make a Difference, 2001.

Brad Tisdale
Director of Risk Management
Mission Wealth Management, LLC
1123 Chapala Street, 2nd Floor
Santa Barbara, CA 93101
(805) 882-2360
btisdale@missionwealth.com