The MERP system changes the way Sample Company & Associates delivers group medical insurance coverage to your employees. The objective is to allow you to deliver an acceptable level of coverage at an affordable budget, for you and for your employees. The MERP System works as follows:
1. A high deductible, fully insured plan absorbs the majority of the claims risk. The MERP system calls for a high deductible group health insurance plan. This plan acts as the .reinsurer. of the benefits and provides guaranteed access to coverage for all employees without excessive risk to the company.
2. The employer.s budget defines how much of the balance of the claims can be paid by the plan. The company then pays a portion of the deductible and co-insurance out of cash flow. This .Corridor. plan pays the difference between the High Deductible plan.s benefits and the benefits the company wishes to deliver to the employees. FBG/FBA provides all administrative services for the MERP system.
3. The MERP system reimburses participants for the corridor claims under section 105 of the Internal Revenue Code. Section 105 of the Internal Revenue Code is what allows large companies to partially and fully self-fund their insurance costs. The MERP program allows smaller firms to utilize this same Code to help reduce insurance costs, and save small employers premium dollars.
4. Expected costs are based on a broad statistical data base. FBG is able to predict the expected claims incurred for companies based on a data base of over 170,000 lives. This data base allows FBG to accurately forecast the claims that a group will experience in the next plan year.
5. Maximum risk must be considered, but is highly unlikely to occur. One element of evaluation is to review the maximum risk potential. This potential is calculated by taking the difference between the high deductible health plan and the plan that is offered to the employees, then multiplying that figure by the total number of covered lives in the plan. This amount is usually higher than current costs, but it is very unlikely to occur.
6. The opportunity for savings is generated by the premium difference between the current plan and the high deductible plan. Once FBG has received the fully insured quotes for a high deductible plan and the current and/or renewal rates, it will be possible to predict the estimated savings for the plan. An additional opportunity for savings occurs when the MERP System plan renews. Since the fully insured premiums under the MERP System are, by definition, lower than the current plan, the increase will also be less than it would be if the company had retained the current coverage.
7. Benefits can either duplicate the current plan or be modified to adjust to the budget limits. The benefits under the MERP System shown in this report are intended to duplicate the benefits under the present coverage. However, should you want to have some movement in the benefits to create greater involvement of the employee participants in the financial consequences of their care decisions, that can be done. It is simply a matter of deciding how you want the benefits structured and setting your MERP System up to administer to that goal. Obviously any such change should result in a reduction of the claims risk to the company.
8. The MERP system also includes a full service section 125 cafeteria plan. The 125 plan includes Flexible Spending Accounts (FSAs) for medical/dental/vision expenses and for child and/or adult dependent care expenses. Also included are premium services to tax qualify the employee contributions for the medical plan and any qualified voluntary benefits the company may choose to include. Under the 125 program the employees save FICA, federal income tax and any applicable state income taxes. The company saves the FICA cost on all qualified employee contributions. The plan services include ALL required testing, reporting and communication materials. All costs for this service are included in the overall MERP System fees.
9. The MERP system also includes COBRA services. This includes notification of COBRA rights to all employees when hired, notification to employees who have had a qualifying event and preparation of the HIPAA certificates as needed. It also includes premium accounting services for those individuals who have exercised their COBRA rights and consulting services to assist employees and the company in complying with the COBRA requirements. Again, all costs for this service are included in the overall MERP System fees.
