SilverStone Group’s Risk Management Team was working with a Real Estate Investment Trust (REIT) company located in the Midwest, addressing their various business-related exposures. The client, however, was not utilizing a broker or consultant for their health coverage needs and worked directly with an insurance carrier.
Following some changes with the client’s business model, their employee population grew by more than 600% in less than 18 months. This growth caused their medical plan costs to rise from $475,000 in February 2008 to $1.9 million by February 2011. As a result, SilverStone Group was engaged to evaluate the client’s employee benefits, which included Medical, Dental and Ancillary (i.e., Basic Life and Long-Term Disability - LTD) coverage. Initial feedback suggested we take a look at alternate funding arrangements on the medical and dental plans, as well as market the client’s ancillary coverage.
In addition, SilverStone Group completed an underwriting projection to validate the healthcare renewal. The result of our efforts yielded the following outcomes:
- The client transitioned their medical program from a fully insured to a self-funded arrangement, which provided significant cash flow savings. As a result of this continued favorable experience, the client’s medical plan is running in a surplus position of $482,647 through 6 months of the current contract year. It is important to note that any surplus funds in the previous fully insured arrangement were retained by the insurance carrier.
- The client’s ancillary coverage had not been marketed for many years. SilverStone Group recommends that our clients evaluate the marketplace every 3-5 years in order to maintain a competitive rate posture. In addition, we recommended several plan design changes to the Basic Life and LTD benefits.
- SilverStone Group’s analysis and recommendations on the ancillary coverage resulted in several several benefit changes, as well as a change in insurance carriers. Below is a summary of our negotiations.
- The client changed the Life Benefit from a flat $50,000 to 1 times an employee’s basic annual earnings, which is a more common plan design. This change yielded annual savings of $37,180, or $111,540 over the 3-year rate guarantee.
- On the LTD, we recommended implementing a “class” schedule, providing separate benefits for hourly versus salaried employees. We also recommend changing the underlying plan from a 66.7% afte-tax benefit to a 60% benefit on a tax free basis. This change resulted in a richer benefit because the LTD payments would not be subject to income taxes. In addition, the annual savings resulted in $43,916, or $131,747 over a 3-year rate guarantee.
This is a great example of how SilverStone Group utilized technical expertise and experience in the market place to bring solutions to our clients.