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Transamerica Affinity Services Case Study
OVERVIEW
A Manufacturing Company in the mid-west had 1,000 retirees receiving self-funded benefits.
With self-funded benefits, a portion of the money for benefits is deducted from active employee paychecks as well as retiree pension checks. The company is obligated to contribute the remaining portion of the funds for benefits. This money is then utilized to pay claims by both the active and retired employees.
PROBLEM
As claims are submitted by both current employees and retirees, the self-funded money is deducted to pay the claims. However, since the retirees incurred more health care costs with increased doctors visits and claims, the retirees quickly "drained" the pool of deposits.
To continue funding the claims, the company was left with two options: 1) put an ever-increasing amount of funds into the pool from company resources, or 2) deduct a higher percentage from employee paychecks and retiree pension checks.
In addition, the retirees were on Medicare and the company was trying to coordinate the major medical benefits around the complex Medicare system.
SOLUTION
Since retirees are consistently higher users of medical benefits than current employees, management wanted to remove the retirees from the self-funded plan.
After careful consideration, this manufacturing firm decided to transfer their retirees to Transamerica's Group Retiree Medical Program, a fully insured program where the company can set it's contribution level.
Now the company has a fixed cost for their Retiree Medical plan and the risk is shifted to the insurance carrier - instead of their company — to fund claims.
RESULTS
This company now has a fixed liability per retiree, and it eliminated the confusion of coordinating a major medical plan around Medicare. In addition, the administrative burden of the retiree health benefits were alleviated from the company.
With all retirees in our Retiree Medical Program, the self-funded plan of active employees now consists of healthy individuals which stabilized costs of the self-funded active plan.
The retirees are also receiving solid health care coverage with Transamerica that is easier to understand because it coordinates directly with Medicare.
Worldwide Employee Benefits Network, Inc.
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