Economic Evaluation Group, Inc.

A Concierge Employee Benefits Consulting & Brokerage Firm 
(516) 338-2800


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GROUP HEALTH PLANS

Managed Care

Managed care is an umbrella term used to describe several types of cost containment models. Managed care is common .choice for small groups. Of the Americans who obtain health care through their employers, 70% are enrolled in a managed care plan. Whether PPO, HMO or POS, managed care plans share some of the same basic characteristics:

  • Comprehensive health care services offered through arrangements with selected doctors, hospitals and providers
  • Financial incentives for recruiting members and convincing them to stay within the network
  • Formal programs for quality assurance and utilization review

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HMO Plans

Health Maintenance Organizations (HMO) offer health care in certain geographic areas. Members of the plan agree on a set number of comprehensive services for an affordable monthly premium. Generally, these plans have no deductibles and a minimal co-pay. HMO participants must use the plan facilities and health care providers in their network in order to be covered by the HMO. However, out-of-network emergency care is sometimes covered.

There are several types of HMO's. In the Staff Model, doctors and other providers are usually directly employed by the HMO. Members must visit these providers at designated facilities, medical centers or offices. The Independent Practice Association (IPA) Model allows contracts with physicians in private practice or with associations of independent physicians. In the IPA model, plan members may use the offices of medical groups or private physicians as long as they are part of the HMO plan.

Basically, all participating providers are bound by the HMO guidelines, and all plan members must stay within the listed providers if they want their non-emergency health care to be covered by the plan. In addition, HMO members must choose a primary care physician. This plan doctor is in charge of all health care decisions and recommendations for the patient.

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POS Plans

A Point of Service is an HMO with indemnity-like out-of-network benefits. The patient chooses to seek treatment in-network or out-of-network at the time they need the service. POS plans generally cost more in monthly premiums than straight HMO's, but they allow the flexibility to go directly to a doctor other than the primary care physician and to consult specialists without referrals.

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PPO Plans

Preferred Provider Organization (PPO) usually contains groups of hospitals and providers that contract with employers, insurers, third-party administrators and others to provide health care services to covered persons and to accept negotiated fees as payment for those services. A PPO usually has a broader base than an HMO. Unlike HMO's, PPO's allow plan participants to go outside the network and still receive coverage, although the benefits will be more limited out-of-network.

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Minimum Premium Plans

Minimum Premium Plans allow an employer to pay only part of their monthly health insurance premiums, (the expense, state premium tax and the commissions portion), and defer the other portion of their premiums, (the claims liability portion), until the insurance company needs the money to cover claims. A Minimum Premium Plan allows the employer to reduce monthly expenses and invest the difference in order to maximize cash flow. This type of plan allows employers to:

 

  • Improve Cash
  • Immediately Benefit from Lower Claims
  • Hold Claims Paying Dollars in an Interest Bearing Account
  • Minimize the Effects of Large Claims

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Self Funded Plan

 

A Self Funded Plan differs from the most common understanding of group health insurance. Instead of contracting an agreement with an insurance carrier, a Self-Funded Plan offers protection from within an organization or business.

In an effort to control rising costs, employers are constantly examining ways to efficiently improve cash flow without sacrificing benefits. Budget considerations, bargaining, agreements, geography and plan design each have an effect on the way a health plan is funded. In 1974, when the Employee Retirement Income Security Act was passed state laws were removed that required employers to become licensed as insurers when they funded their own plans. Since then, Self Funded Plans have become one of the fastest growing areas in the employee benefit industry. Under a Self Funded Plan, it is usually possible for an employer to reduce operating costs significantly and maintain control of reserves. The reserves may then be:

  • Held in a trust, producing tax-exempt interest and therefore reducing the overall expenses of providing employee benefits.
  • Held in an interest-bearing bank trust account.

Each year employers invest millions of dollars into employee benefits programs. Typically, this affects the employer's employee compensation budget without producing the desired return for the following reasons:

  • Insurance plan designs are inflexible
  • Insurance plans consume compensation dollars that may be better spent elsewhere necessary to curb employee turnover and to attract more highly qualified employees.

A Self Funded Plan works like this: The employer decides on a plan of employee benefits with the assistance of a broker or Third Party Administrator (TPA). The plan is often very similar to a plan that insurance carrier would offer. Stop Loss insurance is purchased in order to protect the plan against extreme losses. The amount of risk to be insured will be a function of the employer's size, type, location, benefits plan, financial resources, prior experience and risk tolerance. A plan document is then prepared, with the help of a TPA, containing the exact provisions: eligibility, coverage, termination, benefit description, ID cards and any other materials necessary to complete the plan. Operation of the plan is left up to the TPA.

 

As a result of these efforts, Self Funded employers have generally experienced the following advantageous results:

  • Elimination of Most Premium Taxes
  • Lower Operation Costs
  • Carrier Profit Margin
  • Eliminate Risk Charges
  • More Effective Claim Processing
  • Improved Cost and Utilization Control
  • Improved Cash Flow
  • Better Plan Design Control
  • Removal of Mandatory Benefits
  • Increased Risk Management (Stop Loss Protection

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Health Savings Account (“HSA”)

 

According to the United States Department of the Treasury, “A Health Savings Account is an alternative to traditional health insurance; it is a savings product that offers a different way for consumers to pay for their health care. HSAs enable you to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

You must be covered by a High Deductible Health Plan (HDHP) to be able to take advantage of HSAs. An HDHP generally costs less than what traditional health care coverage costs, so the money that you save on insurance can therefore be put into the Health Savings Account.

You own and you control the money in your HSA. Decisions on how to spend the money are made by you without relying on a third party or a health insurer. You will also decide what types of investments to make with the money in the account in order to make it grow.”

* HDHP = High Deductible Health Plan

** HSA = Health Savings Account

 

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Health Reimbursement Account (HRA)

Health Reimbursement Account are employer-funded plans. HRAs reimburse employees for incurred medical expenses that are not covered by the company's group health plan. Employers purchase a high deductible plan and can fund anywhere from 0% to 100% of the deductible amount.

Employee reimbursements are considered tax deductible to the employer. Reimbursement dollars received by the employee are usually tax free.

Employee may be reimbursed from his or her employer for qualified medical expenses as an added employee benefit.

The funds received are tax-free. Because the plan is employer funded, the employer has the right to cancel or alter the distributions at any time. In spite of this, many employees consider HRAs as a valuable benefit given the rising cost of healthcare.

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Economic Evaluation Group, Inc.

© 2016 Economic Evaluation Group, Inc.

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Economic Evaluation Group, Inc. Specializes in Group Health Insurance (Group Medical Insurance). EE Group is located in Melville, Long Island, New York and service all over the United States and Canada.

 

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