Disability Services Group
181 Wells Ave.
Newton, MA 02459
allan@disabilityservices.com




Our Cost/Benefit Ratio Strategy


Maximizing Benefits that Employees Use Minimizing Hospitalization Shortfalls while Lowering Health Care Premiums
It's a well known fact that a small percentage of employees are responsible for a high proportion of claim dollars. Five percent of the population spend 49 percent of the healthcare dollars.

The problem is that details of specific claim payments are not available from HMO's for groups of less than 100 employees in Massachusetts. Therefore, the challenge is to create a medical plan that maximizes benefits to the employees while reducing the employers cost/benefit ratio.

The largest portion of those claim dollars come from employee hospitalizations and day surgeries. Utilizing high deductible (for hospital only) medical plans can save the employer 10 to 15 percent in premium dollars. These monies are left in the corporate checkbook until a hospital expense is incurred. The deductible is then refunded to the employee (all, some, or not at all; dependent upon the corporate philosophy).

Medical Insurance Program: Group IH

24 person group

($250 copay)
Prior Annualized
Corporate Premium

$210,000
($250 copay)
Renewal +10%)

$231,000
New Annualized
Corporate Premium
($1,000 deductible)

$192,000


Instead of renewing a $250 copay plan with a $231,000 annualized corporate premium, we changed coverage to a $1,000 deductible; with a $192,000 annualized corporate premium. Instead of an increasing premium, the corporation has a projected savings of $39,000.

At the end of the plan year, $12,000 had been reimbursed to employees to fund shortfalls, with a bottom line savings to the corporation of $27,000. The employees were better off with a $1,000 deductible (reimbursed) than a $250 copay (not reimbursed) and the corporation saved $27,000.

Employee Reimbursement Accounts
The ideal way to keep medical insurance coverage affordable is to reverse the historical process. At renewal time, the "norm" has been to:

► increase copay's
► increase employee premium share
► reduce benefits

All designed to keep the employers costs in line.

Another "norm" has been to offer one medical plan to all employees regardless of each employee's medical needs. Our research and experience tells us this process no longer works due to the "rule of 7." The "rule of 7" dictates that similar coverage in seven years will cost twice what it costs us today. Some suggested strategies might be:

Benefit Changes:
► High deductible plan, funding the shortfall w/partial or full reimbursement through an employee reimbursement account
► dd an Rx deductible
► Add an Rx deductible only for nongeneric drugs
► Deductible for "high" (vs low) cost hospitals
► Coinsurance

Premium Contributions: ► Offer a dual option program giving employees more choice
► Structure contribution to encourage employee participation in lower cost plan
► Base employee share on lower cost option allowing employees to "buy up" to higher cost option.
► Defined Contributions with a maximum dollar amount paid toward benefits
► Defined Contributions based on salaries

Life, Short & Long Term Disability Plans: All Clients

► Obtain proposals from twenty leading market share AAA rated insurers
► Improve definition of total disability every time
► Add partial disability benefits to short term disability
► Improve life insurance cutback age and amounts
► Increase monthly benefit to cover shortfall
► Add voluntary life program
► Add voluntary long term care insurance
► Add Disability Counseling Service