What's inefficient about it? Usually this doesn't work if your process sucks. The way I've seen it work well is:

Designer starts on the project a week ahead of programmer. Gathers requirements (with the programmer tagging along). Does paper sketches which get a general a-ok from everyone.

Does html prototype, ideally already in rails.

Hands off to developer, developer wires up. Over time they iterate together on the same codebase.

So in your model there is only a designer and a developer? At my work, we have someone for each specialty: 1. design 2. html 3. backend like php 4. js.

Your designer seems to do both (1) and (2) which is more manageable and something I've had work well. Likewise, your programmer seems to do both (3) and (4).

The problems arise when you need to tweak a small feature. You end up needing four-five people(if you count product manager) to touch it to make the change happen. It's not efficient at least for a web start-up(I can see it work for larger enterprises).

Just being nitpicky, but I think you misread the OP. He said one person does design and HTML, which is exactly what you're saying.

Pretty sure badclient said that the company has one person each for HTML, CSS, JS and PHP.

That does sound pretty nuts - seems like almost every layout/front-end/design change you'd ever need to make would touch both HTML and CSS, requiring two people to handle it separately.

He didn't say CSS, he said design. That could just as easily be Photoshop mockups, with CSS lumped into the HTML job.

My partner does: UI/UX design, HTML and JavaScript and a dash of backend. I do: backend, architecture, algorithms, sysadmin work and HTML + JavaScript when necessary.

It works really well. We also continuously try to expand to the others territory.

Try ditching your templating language so your frontend guys can work independently.