How a Small Daycare Beat a 5,000-Employee District at Their Own Game

Most people think bigger companies get better health insurance rates. That's not always true.

I've been working with a daycare for four years now, and their story shows exactly what I mean. They started as part of a massive 5,000-employee school district's health plan. When they went out on their own with just 70 employees they ended up paying about half of what that huge district was spending on health insurance.

Here is how we made that happen.

Where They Started

This daycare had an unusual arrangement. They provided childcare services for a large local employer, and their workers got health benefits through the contracting school district's plan.

The school district was self-funded with 5,000 employees. On paper, that sounds like it should mean great rates, right?

Not exactly.

When the district ended the contract, the daycare suddenly needed their own benefits plan. Here's the challenge: daycare workers aren't highly paid, so they really depend on having benefits they can actually afford to use.

The employer was contributing $685 per employee toward premiums. Under the old arrangement, this amount barely covered their highest deductible plan option.

Year One: Starting Simple

The first year, we took a straightforward approach and moved them to their own Blue Cross Blue Shield plan.

It worked well. They got reasonable rates because they were now their own risk pool instead of being part of that massive group.

But I knew there were better options out there.

Year Two: Finding Real Savings

We moved them to a level funded plan, and that's when things got interesting.

Result: 12% cost reduction

But the savings were just part of the story. With that same $685 contribution, they could now afford to cover TWO of their lower deductible plans instead of just one high-deductible option.

Same employer contribution, much better benefits for employees.

They still offered a premium plan, but employees could choose to pay extra if they wanted that level of coverage. The key was giving people choices they could actually afford.

Year Three: Keeping Things Stable

Year three focused on maintaining what we'd built. We worked with a different stop loss carrier and managed to keep their renewal essentially flat.

No increase. While many employers were seeing 8-15% bumps, we held steady.

Year Four: Taking It to the Next Level

This year we implemented our Community Connected Health approach:

• Eliminated the PPO network

• Set up direct contracts with local providers

• Added transparent pharmacy benefits

• Introduced direct primary care

Another cost reduction.

Now that same $685 employer contribution covers ALL THREE plan options - from the high-deductible choice all the way up to their premium plan.

What Made the Difference

Better Data Access

Level funding gave us visibility into actual claims data. We could see exactly where healthcare dollars were going and make informed decisions.

Strategic Partnerships

Working with an independent TPA and establishing direct provider relationships eliminated some of the usual middleman costs.

Focus on Usability

Direct primary care means employees get unlimited doctor visits with no copays. For workers making around $25,000 annually, that removes a major barrier to getting care. Better access and care for less!

Where They Ended Up

In four years, this daycare went from covering one basic high-deductible plan to covering three comprehensive options for the same employer contribution.

They cut their effective costs in half compared to being part of a large employer group.

They have saved themselves over $300,000 by modernizing their health plan vs. buying an off the shelf product from some carrier.

Most importantly, their employees now have healthcare access that works with their budget, not against it.

If a small daycare can achieve results like this, it raises some interesting questions about what might be possible for other organizations.

The health insurance market has more options than most people realize. Sometimes it just takes someone willing to look beyond the usual approaches.

Want to explore what Community Connected Health might look like for your organization?

Let's start a conversation about your current situation and what's possible.