by: Chris Hill & Steve Woodward

Many employers spend a considerable amount of money providing a competitive employee benefits program.  Studies confirm that employee benefits play a major role when it comes to attracting and retaining talent. It can safely be said that most employers would like to find ways to lower the cost of those benefits while still offering an excellent benefits program for their valued employees. 

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.