Health insurance has become one of the biggest expenses for businesses usually ranking right behind payroll. Finding the right plan that properly covers your employees and fits into the yearly budget is no easy feat. This has become increasingly challenging as premiums continue to rise, while options continue to dwindle. The A&C Management Group specializes in coming up with creative plans that are both cost-effective and fit the needs of our clients. A great example of our our approach is portrayed in a case study where we saved a law firm over $150,000 by switching them from the small group market to the appropriate PEO based health plan.
The Original Small Group Plan
This law firm was a 33 person group with 28 employees taking health coverage. The firm formerly had a PPO based High Deductible Health Plan (HDHP) funded with Health Reimbursement Accounts (HRA) for their employees. The deductible was $2,000 for an individual and $4,000 for a family. The employer was contributing $1,500 for an individual and $3,000 to employees with a spouse or family, towards the HRA. This was almost always being fully spent by the employees since all medical expenses (doctor’s visits, prescriptions, hospital visits, major diagnostics, etc.) went towards the deductible. Furthermore, the premiums were $718, $1,437, or $2,048 a month depending on whether the employee needed individual coverage, coverage for them and a spouse, or for an entire family. All in all, this led to a total annual premium of $483,672, before accounting for the money that was to be spent from the HRAs to cover the deductibles. The law firm also had to pay about $3,000 for a 3rd party payroll system and $2,000 for Employee Practice Liability Insurance (EPLI). These fees were already included in the administrative fee paid to PEO.
New PEO Based Plan
By switching the law firm to a PEO, the company gained access to health plans on the large group market, and they switched to a cost-sharing plan that had much lower premiums. While this plan had slightly higher deductibles than the previous plan, $3,000 for an individual and $7,500 for a family, the cost-sharing structure actually resulted in greater savings for our client. This is because the deductible only applied to hospital, surgery, and major diagnostic expenses. Doctor’s visits and prescriptions merely required the employees to pay a minimal copay. Therefore, only major expenses contributed to the deductible. This resulted in about $20,000 paid in deductibles for the cost-sharing plan. On the other hand, the PPO plan required around $45,000 in reimbursements towards employee medical deductibles. Thus, an additional $25,000 was saved by switching to the cost-sharing plan. Lastly, the premiums for this plan were only $443 per month for an individual with an annual total of $328,704 after including family prices.
The only additional cost of using the PEO health plan was the administrative fee of $33,000 to be a part of the PEO as a 33 person group. This came with the vast array of PEO services including HR Outsourcing, payroll, and compliance. Furthermore, the $3,000 previously spent on payroll and the $2,000 spent on EPLI can be deducted from the $33,000 resulting in only a true additional fee of $28,000. Our clients also saved $5,000 on their workers compensation insurance rate by switching to a PEO! After considering all factors our clients saved a total of $156,968 and got access to the many great services a PEO has to offer. This has ultimately allowed them to focus more time and resources into revenue generating tasks and has greatly increased their business productivity.
If you have a small business that is currently being hurt by the small group market, contact us to find out if a PEO is the right option for your company.
Senior Director of Business Development
A&C Management Group, LTD