Opportunity: When a small construction company saw their health benefits renewal increase by 33% in one year, a drastic choice was forced upon them: Absorb the cost increase, choose a “less bad” renewal increase by cutting benefits (again), or take action to avoid rate hikes. 

Solution: Taking action. After conducting our client’s Initial Cost Modeling, we presented an analysis that showed their level-funded plan would continue to cut into their profitability each year. As an alternative, the company agreed to implement a custom partially self-funded plan that adopted supply chain management in a data-driven approach to deliver high-quality health care. 

Payoff: Under its custom partially self-funded plan, the company saved 39% on health benefits expenses in 2019 while simultaneously cutting the plan deductible to $0. Bonus: They recently received a refund check of nearly $70,000. By optimizing the health care supply chain, the construction company eliminated waste, improved plan value, and generated EBITDA from within its business. 

Seeing the Light After An Enormous Rate Increase

In prior meetings, we shared that the company might consider leaving their level-funded benefits plan, but they were afraid of change. Health benefits are complicated, and they felt secure with the devil they knew instead of “taking a risk” on a NextGeneration Health Plan. When the renewal hit, the 36-employee company found out that their benefits costs were increasing by $75,000 (an extra $550 per person per month).

Here’s how their plan expenses evolved from one year to the next:


  • Plan Type: Level-Funded (BUCAH) 
  • Total Cost: $228,765
  • Cost Per Employee Per Year (PEPY): $7,888
  • Deductible: $3,000


  • Plan Type: Level-Funded (BUCAH) 
  • Total Cost: $303,746
  • Cost Per Employee Per Year (PEPY): $8,437
  • Deductible: $3,000

After enduring such a dramatic rate increase, the construction company was ready to discuss its options. We recommended leaving the level-funded (BUCAH) plan structure they were so comfortable with to pursue a custom partially self-funded plan. A custom partially self-funded plan gave them access to the providers they were used to while granting the company greater control over the plan details and components. 

A Partially Self-Funded Plan in Action

Implementing the custom partially self-funded plan generated immediate monetary benefits. Almost overnight, their annual plan expenses dipped to $10,000 less than two years ago and a whopping $86,000 less than the prior year. Here’s how their plan changed:


  • Plan Type: Custom Partially Self-Funded
  • Total Cost: $217,791
  • Cost Per Employee Per Year (PEPY): $6,222
  • Deductible: $0

Adopting supply chain management with their custom partially self-funded health plan gave them greater control over medical care and claims cost. By focusing on value, the client enjoys greater insight into their pharmaceutical benefits too. They now have a better overall health care package at a lower cost. 

Eliminating waste in the health plan has been remarkable for both the construction company and its employees. The most favorable improvement for employees has been the $0 deductible and $2,000 out of pocket limit. With a “no deductible” and low out-of-pocket plan, employees and dependents have real benefits: a stellar health care plan at the lowest cost possible.

As a bonus, the company recently received a refund check of $69,955 of plan reserves because their plan delivered claims cost less than what they had funded for the plan. That $69,955 is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This is a real return on Human Capital (ROI) that can be measured, reinvested into wages, a “premium holiday,” new equipment, additional employees, a marketing campaign, or even used to further improve the company’s overall employee benefits package. 

Looking ahead and using client data, we continue to drive value and eliminate waste for the company’s custom health plan. For 2020-2021 we expect to see costs even lower. In fact, they are currently on pace to reach their target PEPY of $4,250 next year. If successful, they may retain an additional $64,791 in health plan reserves (more EBITDA)! 

Change is Worth It

Having experienced the value of a custom partially self-funded plan, our client is now a believer. With predictability and visibility via monthly reports, our client can plan his business and continue to analyze and control expenses while providing real medical benefits to employees.