How One Employer Saved $2.4M in Two Years

For many employers, healthcare costs rise year after year, leaving them with few options other than accepting double-digit premium increases or cutting employee benefits. But with the right strategy, dramatic savings are possible — even mid-market employers can reclaim millions in health plan spend.

This case study demonstrates how one employer achieved exactly that with Memberly’s guidance — turning a projected 38% renewal increase into a manageable 8% increase, saving over $1.2 million in the first year, and realizing another $1.2 million in year two while actually improving benefits for employees.

Discover how Memberly can optimize your health plan costs →

The Challenge: Facing a 38% Health Plan Renewal Increase

The employer faced a significant healthcare cost crisis with a proposed 38% renewal increase based on prior-year claims experience. Their existing plan structure included several cost-driving factors:

A Third-Party Administrator (TPA) arrangement that retained 100% of pharmacy rebates
Spread pricing on prescription drugs with no transparency
A legacy PPO network driving high allowed amounts and inflating claim costs
Rising aggregate factors that increased stop-loss attachment points

Without intervention, this employer would have faced over $1.2 million in additional healthcare costs in year one alone, with no clear path to controlling costs in subsequent years.

The Memberly Solution: A Three-Step Strategic Approach

Memberly implemented a comprehensive three-step strategy to address the root causes of rising costs and create sustainable, multi-year savings.

Step 1: Changing TPAs to Capture Pharmacy Rebates

The first critical step was a TPA replacement. The employer’s prior TPA model retained 100% of pharmacy rebates and used spread pricing, meaning the employer was paying more for prescription drugs than necessary — with no rebate credits coming back to the health plan.

Memberly’s TPA Solution:

Selected a TPA with a transparent Pharmacy Benefit Manager (PBM) arrangement where 100% of manufacturer rebates were passed back to the employer
Eliminated spread pricing completely
Switched to a pass-through drug pricing model for full cost transparency

Result: This change alone reduced net administrative and network costs by $80 per employee per month (PEPM), driving significant fixed cost savings across the entire group.

Learn how transparent PBM arrangements can reduce your costs →

Step 2: Changing the PPO Network to Lower Claim Costs

After securing a better TPA arrangement with full rebate pass-through, Memberly addressed the group’s provider network inefficiencies:

The Network Problem:

The group’s legacy PPO network was driving high allowed amounts for medical services
Inflated claim costs were artificially raising aggregate factors
Higher aggregate factors led to increased monthly funding requirements and stop-loss costs

Memberly’s Network Solution:

Conducted comprehensive network analysis comparing contracted rates and provider access
Transitioned the group to a more competitive PPO network with lower contracted rates
Ensured provider access remained adequate for employee needs

Result: The new PPO network lowered the group’s aggregate factors by 10%, meaning their expected claims funding — and stop-loss attachment point — dropped substantially. This reduction directly lowered monthly contributions and improved the plan’s financial position.

Step 3: Stop-Loss Renewal Negotiation with Repricing

Armed with a new TPA structure, lower fixed costs, and significantly reduced claim projections from the network change, Memberly renegotiated the stop-loss coverage and overall plan renewal.

Renewal Negotiation Process:

The carrier’s original renewal proposal called for a 38% increase based on prior-year claim experience with the old plan structure
After repricing claims with the new network rates and adjusting for the new plan design, Memberly successfully negotiated the renewal
The renewal increase was reduced to just 8% for the first year — a 30-percentage-point improvement

Year Two Success:

In the second year, the plan achieved only a 5% increase — well below market trends
Benefits were actually enhanced during year two to improve member experience and reduce employee out-of-pocket costs
The employer maintained cost control while making the plan more valuable to employees

The Financial Impact: $2.4 Million in Two-Year Savings

Cost Category	Before Memberly	After Memberly	Savings Impact
Administrative + Network Fees	High fixed cost, no rebate credits	$80 PEPM lower, full rebate credit	Significant fixed cost reduction
Aggregate Factors	Legacy PPO pricing	10% lower aggregate factors	Reduced monthly claim funding requirements
Renewal Rate (Year 1)	+38% projected	+8% actual	Avoided $1.2M in additional costs
Renewal Rate (Year 2)	High expected increase	+5% with improved benefits	Additional $1.2M in savings

Total Two-Year Savings: $2.4 million — achieved while improving employee benefits and controlling future renewal volatility.

Understanding the Savings Breakdown

Year One Savings: $1.2 Million

The employer avoided $1.2 million in additional healthcare costs by reducing the renewal increase from 38% to 8%. This 30-percentage-point reduction came from:

Transparent pharmacy rebate pass-through ($80 PEPM savings)
Lower network contracted rates (10% aggregate factor reduction)
Repriced stop-loss based on new plan structure

Year Two Savings: $1.2 Million

An additional $1.2 million in savings was realized in year two through:

Maintaining the structural cost improvements from year one
Achieving a modest 5% renewal increase vs. market trends of 8-12%
Continuing to benefit from transparent PBM rebates and competitive network rates

Critical Achievement: These year-two savings were realized while simultaneously enhancing plan benefits, demonstrating that cost control and benefit improvement are not mutually exclusive.

Schedule a plan review to identify your savings opportunities →

Why This Case Study Matters for Your Organization

This case study demonstrates that employers can take back control of their health plan costs without sacrificing quality or employee satisfaction. The key success factors include:

1. Demanding Transparent Pharmacy Rebate Arrangements

Pharmacy rebates represent significant value that many employers never see. Transparent PBM arrangements that pass 100% of rebates back to the employer can save tens of thousands to millions annually depending on group size.

2. Selecting a Network That Reduces Claim Costs

Not all PPO networks are created equal. Network contracted rates directly impact aggregate factors, monthly funding requirements, and stop-loss costs. Strategic network selection can reduce claim costs by 10% or more without compromising provider access.

3. Using Stop-Loss Repricing to Drive Down Renewal Rates

When you fundamentally change your plan structure through TPA and network changes, your stop-loss should be repriced accordingly. Many employers accept renewal increases based on old plan structures when the underlying cost drivers have changed.

4. Maintaining Long-Term Discipline for Multi-Year Savings

The most successful health plan strategies focus on sustainable, multi-year cost control rather than one-time savings. This case demonstrates how strategic changes in year one create compounding savings in subsequent years.

Key Takeaways for Mid-Market Employers

Cost Control Without Benefit Cuts: This employer achieved $2.4 million in savings while improving benefits, proving that strategic plan optimization doesn’t require reducing coverage.

Transparency Matters: Full pharmacy rebate pass-through and transparent pricing eliminated hidden costs and put money back into the plan.

Network Strategy Drives Savings: A 10% reduction in aggregate factors through strategic network selection delivered immediate and ongoing financial benefits.

Multi-Year Planning Wins: Looking beyond a single plan year to create sustainable cost control produced compounding savings over time.

Get a customized analysis of your health plan savings potential →

How Memberly Delivers Multi-Year Savings

Memberly helps mid-market and large employers identify and capture substantial healthcare savings through strategic plan optimization. Our approach includes:

Comprehensive Plan Analysis

We benchmark your current TPA, PBM arrangement, provider network, and stop-loss coverage against best-in-class alternatives to identify specific savings opportunities.

TPA and PBM Optimization

We ensure you have transparent pharmacy rebate arrangements with 100% pass-through and eliminate spread pricing that inflates your drug costs.

Strategic Network Selection

We analyze provider networks to find optimal combinations of competitive contracted rates and adequate provider access, directly reducing your aggregate factors and claim costs.

Stop-Loss Negotiation and Repricing

We negotiate favorable stop-loss terms and ensure your coverage is priced based on your current plan structure, not outdated assumptions from prior arrangements.

Multi-Year Strategic Planning

We develop sustainable cost control strategies that deliver savings year after year, not just one-time reductions that disappear at the next renewal.

Could Your Organization Save $1 Million or More?

If your organization faces rising healthcare costs, accepts high renewal increases, or lacks transparency in your pharmacy benefits, significant savings may be available through strategic plan optimization.

Memberly has helped employers across industries reduce healthcare costs by millions while maintaining or improving employee benefits. The case study above represents real results from strategic planning and disciplined execution.

Don’t accept unsustainable cost increases. Discover what’s possible with expert guidance.

Visit our self-funded PPO plans page to learn more →

Request Your Plan Review Today

Want to see if similar multi-year savings are possible for your organization? Memberly will benchmark your TPA, pharmacy benefits, provider network, and stop-loss coverage, then show you how to reduce costs year over year while maintaining or improving benefits.

Schedule your comprehensive plan review →

Memberly Benefits | Strategic Health Plan Optimization Delivering Multi-Year Savings