Case Studies

No Tolerance for Health Care Cost Increase Business Challenge

Business Challenge

VIASYS Healthcare, a national manufacturer of medical devices with 1,700 employees, was under extraordinary pressure to manage costs. The Health & Welfare benefit plan budget represented $11,000,000 in expense. There was a mandate to keep expenses flat. Initial projections indicated that costs would increase by 10.7%. Pentra was retained to deliver a “no increase” budget that did not cost shift to employees. To minimize disruption, Pentra was also challenged make every effort not to change medical and dental vendors.

Solution

Pentra structured an action plan that focused on a completing a comprehensive examination of all plan designs, claim experience, large claims, demographics, premium rate history and employee contributions. The goal was to examine every detail of every plan more carefully and thoughtfully than the insurance companies that were providing the coverage. By taking this approach, Pentra was able to help the underwriters understand why it made sense to change some of their rating assumptions, thus reducing costs. Key elements of this process included a:

  • Review of contract terms and conditions of all plans with incumbent vendors
  • Preparation of a detailed Request for Proposal (RFP) on all ancillary lines of coverage
  • Assessment of industry benchmarks and best practices to help establish a baseline for evaluating costs
  • Extensive evaluation of insurance vendor assumptions, including retention components, medical and dental trend, experience weighting, large claims, reserve assumptions, pooling points, and network access charges
  • Modeling financial projections and budget estimates based on the various plan options and recommendations
  • Fact based negotiation of critical renewal components to help insurance vendors get comfortable with the facts and circumstances that Pentra uncovered

Outcome

Based on Pentra’s approach to managing this situation, the following outcomes were achieved:

  • The original 10.7% medical increase was reduced to 2.1% by implementing a more consistent national network and making all plan designs (co-pays, deductibles and out-of-pocket costs) consistent across the country. This approach provided greater parity to employees in different states and was not perceived as a reduction of benefits.
  • $250,000 in cost savings was delivered by identifying alternate insurance vendors of equal or better quality for select ancillary lines. These savings were based on Pentra’s ability to help underwriters understand the risk profile, not by simply finding alternative insurance vendors to buy the business.
  • The budget objective was met. A total reduction of $1.2 million in expense relative to the initial projections was delivered.
  • No changes to employee contributions were made and the medical and dental vendors remained in place.

At Pentra, we negotiate based on facts, data, and industry knowledge. We use sophisticated underwriting tools to determine what the right price for each risk should be, and we help our clients understand the short and long term implications of every decision they make.