Private Equity – Portfolio Employee Benefits Solution: A Case Study

Situation

A Midwest private equity firm with 10 portfolio companies was in a fully insured, pooled benefits program that Oswald built with BlueCross BlueShield. While each company could design its own health insurance plan, claims risk was spread over the volume of the pooled population.

Although pooled programs are still advantageous in certain scenarios, over time the health insurance market had dramatically changed. Inflation was now a bigger factor and the risk appetite from carriers had shifted, causing fully insured products to be penalized by conservative underwriting and increased administrative fees. The rise in insurance trend made the fully insured pool unsustainable for the entire portfolio, which defeated the purposes of the pool.

Solution

Oswald decided to carve each portfolio company out of the pool and find unique solutions for the individual companies to remain competitive while also providing innovative solutions for those with higher risk. We looked at alternative funding solutions, plan designs, contributions, individual plans, and many other approaches to contain costs.

Although the insurance products were specific to each company, the process to assess and benchmark each company was uniformed across the portfolio. When all was said and done, Oswald retained a pool for four portfolio companies, and six implemented solutions outside of the pool.

Historically, we kept the per employee per year renewal under 3.5% while in the pool, and our goal was to continue that trend outside of the pool as well. This was below the national trend of 7-9%.

Result

The strategic changes in benefits resulted in 9.6% savings and over $1.4 million in year-over-year EBITDA impact for the portfolio.

Over our nine-year history with this client, we have saved them more than $4.5 million on benefits.

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