Ovation Benefits // Case Study Analysis

Customer Profile 1:

• 590 Active Employees/110 Retirees
• All Employees located in CT
• Municipality (Town and Board of Education)
• 48% of employees over age 40
• Low turnover
• Medical & Dental with same carrier for many years without bidding. Both plans were fully insured.
• Unsatisfactory cost management solutions from current benefits advisor.

Challenges:

• State and local tax reductions to fund employee benefits
• Multi-year Union contracts
• High claim utilization with existing plans
• Large financial liabilities between healthcare and GASB

Major Objectives:

• Short and long-term reduction in healthcare costs
• Offer competitive benefits
• Reduce future risks
• Save taxpayer dollars
• Avoid Union concerns & grievances

Actions:

• Customer replaced current broker with Ovation Benefits.
• Ovation Benefits immediately conducted an in-depth analysis of existing plan designs and claim utilization patterns, and determined it was necessary to bid the existing medical and dental plans.
• Ovation Benefits determined, based upon an extensive analysis, much of the medical costs (over 60%) were directly related to poor lifestyle habits of the customer’s members. An extensive Wellness RFP was customized for the client and was included with the bid requests.

Results Achieved:

• A new Medical carrier was selected. The Dental plan remained with the current carrier and the plan funding was changed to self-funding (ASO). The Medical bid and subsequent negotiations resulted in over $500,000 in savings, while duplicating existing benefits.
• The Dental plan remained with the current carrier and the plan funding was changed to self-funding (ASO). By changing the Dental funding arrangement providing the client with additional annual savings of $100,000 on a mature basis.
• A comprehensive Wellness Strategy was implemented to assist employees in improving their poor lifestyle habits, which also mitigated future claim risks and dollars for the customer.
• Through the bid process, a comprehensive Wellness Plan was designed by Ovation Benefits and was included with the RFP. The winning carrier agreed to provide over $200,000 to fund the wellness programs which included worksite wellness, health coaching services, biometric screenings, employee incentives, and a health risk
  assessment.

Bottom Line Results:

– Over $800,000 in annual saving were achieved for this customer.
– Benefits were enhanced through the comprehensive wellness program.
– And a multi-year benefits strategy was implemented for future costs savings.

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Customer Profile 2:

• Construction and Construction Management
• 160 Active Employees
• Corporate headquarters is based in CT
• Employees are located in multiple sites and multiple states

Challenges:

• Benefits, Payroll, HR and Eligibility functions were decentralized and handled by many people. Each site managed these functions independently and inconsistently, and data was not accurately managed. Existing processes were labor intensive.
• Too many employees were involved to oversee sensitive functions.
• The existing payroll system was “home grown” and did not feed other critical data sources.
• Benefits enrollment processes was manual and very labor intensive.
• The client was unable to pull any management reports from the existing data bases.
• COBRA was self-administered and important filing deadlines were missed, causing unnecessary extensions in COBRA time periods and additional claims liability.

Major Objectives:

• Improve efficiency and accuracy of all key HR, Benefits, Payroll and Eligibility data.
• Centralize functions and identify clear oversight responsibilities.
• Reduce costs.
• Streamline processes.

Actions:

• Ovation Benefits completed an extensive analysis and review of the customer’s existing benefits administration systems and processes.
• Ovation Benefits installed a new state of the art Human Resource Information System (HRIS) to address and streamline the existing challenge (payroll, benefits, eligibility, HR).
• The client centralized benefit administration to improve consistent delivery of HR policies and procedures.
• The client outsourced COBRA administration to Ovation Benefits and linked the COBRA data to HRIS.
• Additionally, the new benefits system provides the function of producing annual benefit statements for employees to demonstrate the value of total compensation (including salary and benefits).
• The Ovation Benefits team provided ongoing service, administrative and technical support to all functions, integrating the benefits administration into the overall, comprehensive benefits strategy for the client.

Results Achieved:

• One centralized, integrated source for all data (HRIS).
• Single point of entry for all benefit information, payroll, and eligibility.
• Automated COBRA administration has eliminated administrative errors .
• Billing and data integrity dramatically improved.
• One data source now feeds all eligibility systems for all insurance carriers.
• Process improvements and new efficiencies have resulted in the expense reduction to the equivalent of one full time employee.
• The annual benefits enrollment process has been streamlined through the on-line benefit enrollment option.
• The customer can easily access both standard and ad hoc client reports at the touch of a button.

Bottom Line Results:

– Over $55,000 in annual savings were achieved for this customer.
– The client’s data is now accurate and centrally administered.
– The client has more time to focus on strategic issues VS administrative issues.
– While not measurable, COBRA continuees are now removed on a timely basis, thus reducing unnecessary claim payment exposure financial penalties.

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Customer Profile 3:

• 2,500 active employees
• All Employees based in CT
• Municipality (Town and Board of Education)
• Low turnover
• The Town and Board of Education had separate Life and LTD carriers for many years.
• The Employer’s focus was on the Medical coverages and the majority of the resources were dedicated to managing the medical and prescription costs. There were no service issues and no plan changes for many years with the Life and Disability plans…”it wasn’t broken so why fix it”, so these plans had not been reviewed in quite sometime.

Challenges:

• State and local tax reductions to fund employee benefits
• Multi-year Union contracts/Union bargained benefits
• Large financial liabilities with healthcare
• The Life and Disability plan provisions were out-dated and required updating, as well as a thorough review with the current union agreements.

Major Objectives:

• Short and long-term reduction in benefit costs
• Offer competitive benefits
• Save taxpayer dollars
• Avoid Union concerns & grievances

Actions:

• Ovation Benefits issued an extensive/detailed bid for the Life/AD&D and LTD benefits.
• Through the bid process, three carriers were selected as finalists and finalist meeting interviews were scheduled and conducted. The bid process was highly competitive.
  

Results Achieved:

• After extensive evaluation of the bidders, one of the incumbent carrier’s was selected to provide coverage for both the Town and Board of Education.
• By combining the plans between the Town and Board of Education, additional economies of scale were realized.
• By choosing an incumbent carrier, implementation went very smoothly and in the process, service levels were enhanced and plan provisions were updated for the combined plans.
• Due to the highly competitive nature of the bids, Ovation was successful in ultimately negotiating 5 year rate guarantees for the Employer…a rarity in Life and LTD bidding.
• The Life and LTD premiums were dramatically decreased on an annual and multi-year basis.
• The carrier agreed to re-look at rates after 3 years and if the loss ratio was at or below a mutually agreed upon level, rates would be reduced another 10%.

Bottom Line Results:

– The annual medical budget was reduced to $25,000,000, saving this municipality over $5,000,000 annually;
– Benefits were enhanced through the comprehensive wellness programs and by covering preventive care at 100%;
– And a multi-year benefits strategy was implemented for future cost savings.

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Customer Profile 4:

• 2,500 employees
• All Employees based in CT
• Municipality
• 65% of employees over age 40
• Low turnover
• Same Medical Carrier for many years, with rich benefits
• Average annual claim costs per employee per year were 47% above the carrier norm
• Employer was satisfied with the existing medical carrier’s financial and service performance.
• The Employer was considering offering a wellness plan for their employees but had no additional funds for a program.
• The current annual medical budget was $30,000,000.

Challenges:

• State and local tax reductions to fund employee benefits
• Multi-year Union contracts/Union bargained benefits
• High claim utilization with existing plans
• Large financial liabilities between healthcare and GASB
• Medical claim increasing over budget year over year

Major Objectives:

• Short and long-term reduction in healthcare costs
• Offer competitive benefits
• Reduce future risks
• Save taxpayer dollars
• Avoid Union concerns & grievances
• Increase employee awareness of healthcare costs

Actions:

• Ovation Benefits and the existing carrier conducted an in-depth analysis of claim utilization data to identify major cost drivers. 45% of claims fell into 4 primary life-style related diagnostic groups; musculoskeletal, gastro, cardio, and cancers.
• Ovation Benefits prepared detailed financial documents and educated the union on all details of the financial picture of the benefit plans.
• 100% Preventive Care benefits were added to the CDHP plan offering for employees and their families.

Results Achieved:

• The HDHP/HSA plan produced annual saving for the Employer of $7,500 annually for family coverage, and the employer could fund 83% of the HSA.
• The Employee’s total OOP costs were reduced annually by $1,350 and $2,250 depending upon the prior PPO plan design.
• Even with the Employer reinvestment of the deductible subsidy, the employer still achieved $3,000 in annual savings for each employee with family coverage.
• The Employer is currently evaluating reinvesting some of the savings to fund a comprehensive wellness plan.
• The annual medical budget was reduced to $25,000,000 which also included funding 83% of the HSA deductible.
• The Union was fully engaged in the decision making process and understood the personal advantages of the CDHP, as well as understood the savings to their employer…a “win-win”.

Bottom Line Results:

– The annual medical budget was reduced to $25,000,000, saving this municipality over $5,000,000 annually;
– Benefits were enhanced through the comprehensive wellness programs and by covering preventive care at 100%;
– And a multi-year benefits strategy was implemented for future cost savings.

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