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Small Business Employee Benefit Plans Orange County
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By: Matt Etri Email Article
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A case study of an Newport Beach small business that saved 58% on their group health insurance without reducing benefits.

In previous blogs, we have talked about saving small to medium sized businesses (2-300 employees) money on their group health insurance costs, and this week, we will review a recent example with some huge savings! Our case study is a development company in Newport Beach in Southern California with 49 employees. We'll call them Company A and they have always offered a nice employee benefits package to their loyal staff. Company A has had an annual group health insurance cost of $716,129, which has been increasing steadily by double digits for the last 10 years.

Solana Insurance Services Employee Benefits was able to enroll Company A in a lower cost plan while maintaining the same benefits for the employees that they had enjoyed in the past. Now remember, as we have discussed in previous blogs, two different 10 year studies conducted by both Kaiser and Blue Cross of California (now Anthem Blue Cross) showed that on average, 50-70% of employees within any given group simply do not use their health insurance, or use it extremely little. 4-7 % of employees within any group typically exceed their max out of pocket, or use the plan chronically.

Because of this fact, Company A was able to enroll in a higher deductible plan with the same plan design for the employees but with a much lower premium. The maximum premium cost based on the hypothetical possibility of all employees in the group hitting their max out of pocket was reduced to $542,185 (this never happens). That is a 24.2% decrease instantly, however based on the actual estimate of plan usage (a calculation derived from the estimated projected claims from Solana's Third Party Administrator) the company will only spend $299,236. That is a savings of $416,893 annually for a company with 49 employees. That's up to a 58% reduction if events occur as predicted. Remember, the worst case is Company A may have to spend up to $542,185, which is still a 24% reduction from the $716,000 they spent last year.

Now, the trick to this approach, referred to as an employer driven health plan, is managing the money saved from the reduction in premium. That's where Solana and its partner come in. Solana's partner, a third party administrator (TPA) has been doing this for over 17 years, with over 3,600 companies and a 97% retention rate. This kind of "partial self funding" is what large groups have been doing for over 20 years, with dramatic reductions in health care costs.

Mechanically, the way it works is the employees continue to pay their usual co-pays and deductibles as they have in the past and the small minority who exceed their co-pay and deductibles will have those additional medical expenses paid by the excess funds available through the reduced premiums and administered by the TPA. There is an additional "Stop-Loss" provision built into the plan to insure the company against catastrophic losses, and at the end of the year, the money leftover is returned to the company in the form of a check or is applied to the following year's premiums.

When the managers of Company A were introduced to the idea of the employer driven health plan, they could not believe it! The prospect of saving over $400,000 on their group health insurance was a welcomed notion for a small business in a time of economic uncertainty. Company A is one of the few Orange County businesses that will be able to increase benefits for their employees next year with the savings. We can help with your Small Business Health Plans Newport Beach.

Small Business Employee Benefit Plans Orange CountyGroup Health Plans Orange County Solana Insurance Services, Inc. Employee Benefits 3700 Newport Blvd. #309 Newport Beach, CA 92663 949-285-7209 direct

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