Finding Line-of-Coverage Savings

The Challenge

A non-union, white-collar healthcare company with 1,500 employees hired a new CFO to reduce costs wherever possible. Based on our past professional relationship with the CFO, we were asked to make recommendations. At the time, the company’s HR was very protective of incumbent brokers, and the head of benefits admitted that they used Google to come up with cost-saving ideas.

The Solution

We reviewed every line of coverage and assessed:

  • The validity of the rates of fully insured
  • Claims to premium ratio
  • Network discounts for self-insured medical
  • Broker commissions and fees
  • RX rebates, average wholesale price discounts, and cost containment programs
  • Plan designs
  • Employee contributions
  • Stop loss analysis
A combination of disruptive and non-disruptive benefit changes. The mandate was to find savings.

The Results

Based on a 5500 annual filing and the reported commissions totaling $531,000, the broker was highly overpaid. For each line of coverage, savings were generated as follows:

Savings by Line of Coverage

Click a line to see how we found it.
Line of Coverage
Cost
Broker Commissions
($236,000)
Medical savings were generated from plan design consolidation to member migration to a more controlled network with Blue Cross.
RX savings were generated through a combination of plan design changes, international drug sourcing, and patient assistance programs.
STD savings came from redesigning this non-contributory single plan into a dual option with an employer-paid core plan and an employee buy-up option.
LTD savings came through the same approach as STD. Additionally, employees were provided a tax-free benefit at the point of claim.
Life savings are generated by a reduction in benefits from a one-time salary to a flat $50k, and then allowing the employee to purchase supplemental life.
Vision savings are estimated by moving funding from fully insured to ASO. Before the solution, it was running at a 55% loss ratio on a credible-size group, with little downside risk to ASO and huge underwriting gains held by the carrier as fully insured.
EAP savings were generated by terminating one of the two EAPs they had in place. Before the reduction, the company did not realize that one of its EAP options was offered by its life carrier.
Projected Savings
($1,588,252)