About the Client
This client, who I will call “The Bank” henceforth, is a mid-sized, regionally owned bank located in the greater Houston area, consisting of 5 branches throughout southeast Texas. The Bank has approximately 110 employees. The bank has incredibly deep roots in its community, having been there since 1890.
Like most employers, The Bank has struggled with high rates for the previous decade. This was caused by high utilization overall, meaning that the employees on the health insurance used the plan often and for high cost procedures and medications.
In addition to having high utilization overall, The Bank has a handful of employees afflicted with medical conditions that are particularly unappealing to any underwriter interested in issuing quotes for health insurance. These include late stage, aggressive cancers and autoimmune disease that are particularly expensive to treat.
Lastly, the conditions that resulted in high claims and unappealing rates were accompanied by prognoses indicating long term treatment for said conditions would be necessary. This means that The Bank couldn’t just “wait out” the bad conditions, they had to be addressed or the rates would continue to climb year over year.
After one year of utilizing the customized package, The Bank saved $500,000 on one prescription alone. This particular drug was the highest single cost The Bank incurred year after year, and yet that cost was driven down to exactly $0. I know this sounds unbelievable, but it is true, and we have the data to back it up. This single act saved 1/3 of the utilization cost the bank incurred that year. In addition to this, utilization across the board decreased approximately 20% for medical procedures, driving down costs even further.
Even though this saved money in the short-term, the true benefit of this did not come about until one year after implementation. Due to there being consistent cost savings throughout the entire year, insurance carriers that refused to issue bids to The Bank the year prior aggressively pursued The Bank at renewal as the overall risk level was substantially lower.
Prior to this, renewal increases ran at approximately 25%-30% year over year for the previous 7 years. 1 year after our cost containment measures went into effect, The Bank’s renewal came in at less than half, and we anticipate an even lower renewal next year.
How We Helped
The Bank had to change something. High rate increases occurred year after year, and it was clear that soon, the rates would be completely unaffordable. Additionally, this entity has to compete with the State of Texas for employees. Considering how the state offers extremely rich benefits, The Bank could not simply water down the benefits without unacceptable risk of losing valuable, trained employees.
We utilized a type of entity called a 3rd party administrator, or TPA. From the ground up, we customized types of plans the employees picked, but much more importantly, the individual components that make an insurance policy. This would include the administrator of the benefits so claims would continue to be paid in a timely manner, the pharmacy benefit manager, or PBM, so that we could receive enormous discounts on the most expense drugs being utilized by the employees, and a stop-loss carrier that had a particular appetite for groups of similar size and risk as The Bank.