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.

With spring in full bloom on the Central Coast and the first year of Riviera Insurance completed, I am happy to say that things are moving into place quite nicely.  With everything new coming about I thought it might be time to review a few things, specifically, your company’s benefits package and how efficiently it is working for you.  As the cost of plans is consistently on the rise, it is critical review policies annually.

Recently, Steve Woodward and I were working with a tech start up. This company came to us and asked us to cover every aspect of their insurance program.  Their biggest concern was creating a competitive and efficient benefits package, something we felt confident in developing. 

This particular entrepreneur had successfully built his last company up to several hundred employees and he wanted a program for his new company that would be open to similar growth.  We were hired to develop an employee benefit plan that provides flexible options for the employees and is sustainable as the business expands.

Contrastingly, I remember the first time Steve and I sat in a room together with the CFO and HR Director of a different company.  Almost instantly, the CFO focused on the expected rate increase and wanted to cut benefits. Meanwhile, the HR Director told the CFO that their current benefit package was not a competitive recruitment tool, and that it affected the talent they could attract and retain.  Debate ensued.

In the end, we compromised.  The employer saw their cost rise and employees saw their co-payments increase.

Today Steve and I try to approach things a little differently.  Over time, we have refined our approach and designed a viable solution for both sides of the issue.

Our first point of business is to find a price range that the company is comfortable budgeting.  From here, we establish a fixed dollar amount that the employer will pay for each employee.  In some cases, there may be different dollar levels, dependent on job title.

We then work with the HR Director to establish a menu of plans.  Key components include doctor network and the spectrum of plan design features; HMO, PPO, and HSA are common acronyms on this menu.  With new options available every year it is critical to educate both employer and employees to help them choose individual plans.

When current or perspective employees are looking at the benefits package, they should see a spreadsheet detailing each plan and cost. This simple method of education allows the employees to take more control over their health insurance; benefiting them, and their employer.

Changing benefits, to combat increased costs, is never easy.  However, employers who embrace the change will find solutions that work for them and their employees.  At Riviera Insurance, we are dedicated to making the most of your insurance investment in the face of rising costs.

We are here to help you design and implement an effective employee benefits plan.  Please let us be of service.