Scenario

A business employer with fifty employees (50) provides benefits for the employees.  This employer faces two key challenges.  First is the double-digit increase they have had to absorb over the past few years with their medical insurance.  With these increases and less cash flow for the business, the company can only provide medical insurance, in which the company pays 80% for the individual and 50% for the family, dental insurance, in which the company pays 100%, and vision insurance, which is voluntary.  The company does not offer any other benefits.  The second challenge the company has faced is it feels that its overall benefits package is lacking in comparison to its competition in the local marketplace.

Our Recommendation:

The total cost of medical insurance has risen substantially over the past decade.  Companies need to provide these benefits to attract and retain their employees but do not want to compromise their bottom line. 

In order to provide the best solution for the medical plan we looked at a level funded program for this employer. With a level funded program, the employer has the option to design the program best suited for the needs of the employer and employees and at the same time have cost savings. For example, if the increase is because of the prescription plan usage the employer can adjust the copays to reduce the cost of the plan. If doctor’s office or emergency room visits are what is increasing the cost of the plan, the employer can make adjustments in the employee cost sharing in order to reduce the employer’s cost. With a level funded program, the employer receives a cost analysis each month that shows the employer where the money is being spent. This gives the employer information they can use when planning the next year’s benefits plans. If at the end of the contract if the expenses paid are less than the cost of the plan the employer will receive a refund for the difference. This can be used to offset the medical plan the following year or to add other programs.  

In addition, we recommended another dental carrier with a better network of dentists for their employees, which was 30% cheaper.  These savings could add a small life insurance plan, and the employer could pick up the monthly costs.  In addition, the life insurance plan allows the employee to increase the life amount without medical underwriting or medical tests.  To enhance the overall benefits package, we recommended that the employer add voluntary disability, accident, and critical illness plans from which the employee can choose, and premiums would be automatically deducted from the paycheck.  These plans are very inexpensive, especially factoring in the pre-tax savings. 

Implementing our recommendations, the employer would have a highly competitive benefits package that is better than the industry standard and still cost-effective for the employer and employee.