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Here is an example of how an employer can calculate his premium savings with a Dovetail Plan.
1. The employer compares his total current health insurance costs against what his cost would be with a higher deductible (as an example, we'll assume he raises his deductible by $2,000).
2. Assisted by his employee benefits professional, the employer calculates how much it will cost to "make good" (fund) on the $2,000 of additional financial exposure that he has created for each of his covered employees and dependents. The employer then installs a HRA to fund this value on an ongoing basis every month. (Hint: this cost can be calculated with a high degree of precision, and will be very low when compared to the value derived by multiplying $2,000 by the number of covered individuals in the plan.)
3. The employer adds the monthly cost of his newly designed health plan and the cost of funding the claims and administration fees of his HRA together, and compares that sum against what his health plan was costing him before implementing the plan changes.
The results? In 95% of cases, the employer saves money. In the majority of cases, the employer saves 15%. We have some cases in which the employer saved more than 25%!
The employees and dependents of this group are now covered under two separate benefits: one administered by the insurance company, and one administered by TPA Systems Inc. (TPAS). However, the value of the two benefits together is often the same as the value of the previous, more expensive health plan. In many cases, the benefits can even be improved!
Covered individuals now possess two ID cards - one for each set of benefits. When an employee obtains health care, the insurance company provides an Explanation of Benefits (EOB) to the employee. These EOB's are faxed by the employee to TPAS, along with a simple claim form where the blanks consume a fourth of a page! TPAS then promptly reimburses the employee for the expenses that the insurance company allowed toward the deductible. It's as simple a that!
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