The employer installs a high deductible health plan, which saves the employer money on medical premiums. Then, using some of the savings the employer reimburses a portion of the incurred deductible costs to the employee.

 

With the high costs of medical premiums ever increasing, offering a high deductible health plan and then reimbursing part of the deductible through a MERP has become economically advantageous. For example, let say that in the past an employer has offered a $500 deductible health plan to its employees. Premium costs have forced the employer to look at ways to save money on medical expenses. Therefore, the employer chooses to opt for a high deductible health plan of $1500. To keep the employee cost at $500, the employer then implements a self-funded MERP that will reimburse the employee the deductible cost after the employee has spent $500 in deductible expenses. The employer would then start reimbursing the employee up to $1000 in deductible expenses. After the $1500 deductible expense is met the insured plan takes over paying the medical expense costs.

 

Not all employees will use the total $1500 deductible within a given benefit year, therefore, the employer continues to save medical benefit dollars.