It’s no secret and there is no nice way around it – health care is expensive and it is only getting more so.
For many companies, providing medical benefits was once considered a given. Now, it is seen as an effective, albeit costly, employee recruitment and retention tool.
Even a luxury.
Kathy Frazier, owner of Vancouver-based Frazier Benefits Group, said her clients are seeing an average of 16 percent to 18 percent annual increases in the cost of providing medical benefits. But employers aren’t cancelling their benefits packages.
Instead they are continually evaluating their options and opportunities to deflect or mitigate the rising costs, said Ann Nordquist, president elect of the Southwest Washington Human Resources Association.
In fact, after two years of decline, the percentage of Washington employers offering health insurance to full-time workers stabilized in 2007 at 66 percent, according to the most recent data available from the state Employment Security Department.
The percentage offering insurance to part-time workers slipped slightly from 14.2 percent in 2006 to 11.2 percent in 2007.
The ESD’s study did not produce clear data about the reason for the decline, but notes that the drop in offerings for part-time workers could be due to employers attempting to maintain the benefits offered to their full-time workers.
Locally, many employers that are able to renew their group plans are increasing their deductibles in order to reduce premiums, said Mollie Jenkins, a producer in the benefits department at Nies Insurance Agency’s Camas office.
More often, employees are paying more of the cost of their premiums and their dependents are enrolling in individual plans because it is too expensive to join the employer’s plan, she said.
“What companies are looking at are ways to mitigate cost increases and opportunities to improve the offerings,” Nordquist said. “They’re focusing on wellness – wellness programs, discounted gym memberships, chronic disease management and preventative care.”
Employers also are investing in employee education, helping them take ownership of health plans, ask better questions about their health and feel more comfortable with the system – creating successful health care utilizers and consumers, she said.
And in a marketplace where many small employers aren’t able to afford benefits, some are looking for opportunities to partner with larger companies to obtain a better group rate, Nordquist said.
The name of the game
“When I first started my business, the first thing on my mind was to not go out of business,” said Ali Alquraisha, who opened Camas Fresh Produce four years ago. “I didn’t know if we were going to be here a few years later.”
Alquraisha looked at offering benefits for the store’s four full-time employees but determined it wasn’t cost effective because the company didn’t make money for the first two years.
“We were in the red,” he said. “If we would have offered benefits from the beginning, we wouldn’t be in business now.”
Alquraisha said he strongly believes in offering benefits, and hopes that as Camas Fresh Produce expands into a bigger space, he can afford to do so.
At Vancouver-based Infinity Internet, the cost is seen as part of the company’s commitment to employees – and a part of doing business.
Annually, the company budgets for 10 percent increases in the cost of offering its 34 full-time employees medical coverage. The actual cost increases are usually 12 percent to 15 percent, said Human Resources Coordinator Randy Toland.
Toland has worked for Infinity for four years, during which time the company has switched insurance carriers three times.
The company pays 85 percent of its employees’ premiums and half of dependent costs.
“We’re trying to get to that golden pinnacle where we’re able to increase our coverage a bit and add something to the menu but have the employee not see much, if any, increase in their out-of-pocket expenses,” he said.
Toland said the company’s ability to be successful in that mission is due, in great part, to the relationships it has had with brokers.
And Toland said benefits have become a big carrot to dangle in front of prospective employees.
“Seventy-five percent of our candidates, after reviewing our benefits packages, say that for the size of employer we are, they’re blown away,” he said.
On both sides
Camas-based Lacamas Medical Group sees with the rising cost of insurance on both ends – dealing with patient insurance and covering its 16 full-time employees.
Lacamas was founded almost five years ago and started by offering limited medical benefits and adding as the practice grew, said Clinic Manager Jan Loomis.
“You look at your bottom line and then you look at what you want,” she said. “First you get the nuts and bolts and then you go for the extras, but sometimes that’s a tough decision.”
The clinic sees insurance cost increases of 10 percent to 15 percent annually, but as providers, has not seen insurance reimbursement match those increases, said Scott Jonason, a physicians assistant who founded the practice.
“Those increased costs are not going on to primary care,” he said.
The decision to offer medical coverage from the beginning added a year and a half to the time it took for the clinic to move into the black. Five years ago, it invested $65,000 to $70,000 in the benefits program. Now, because of increased staff, offerings and costs, the practice pays $80,000 annually.
As providers, the medical group is seeing more uninsured patients than ever before, deductibles of up to $5,000, higher copays and on the positive side, more health savings accounts, Loomis said.
“Insurance is a cost of doing business,” Jonason said. “It’s about employee satisfaction and retention, and I think it’s the right thing to do. It costs a heck of a lot less to keep someone happy than to hire and train someone new.”
RETURN ON INVESTMENT
Burgerville is well known for its relatively new medical coverage plan but Chief Cultural Director Jack Graves said the Vancouver company has always offered coverage for its employees – it just wasn’t always affordable.
Employees used to pay half of their premiums – and at $2 an hour in 1976, it wasn’t working, he said. In 2005, the company responded to an employee survey that called for affordable coverage and worked with Kaiser Permanente to create the plan that was instituted on Jan. 1, 2006. Now employees pay $15 per month – $30 to cover children and $90 for families – with no deductable.
Even with the rise in insurance costs, Burgerville continues to realize the benefits of the program, Graves said.
While the first year, the company invested $1.4 million in the program – it’s risen to $2 million with more enrollment and cost – but hourly employees tend to be younger. And the younger the employee, the lower the cost to insure, he said.
Premiums for salaried employees are much more expensive because, not to put too fine a point on it, they’re older, Graves said.
“If we had to pay the same premiums we pay with our salaried employees, we wouldn’t be having this conversation,” he said. “There would be no way to recoup that expense.”
The company has between 1,450 and 1,500 employees, 300 of whom are salaried.
The first year, Burgerville saw its turnover rates drop from 128 percent to 54 percent – saving the company half a million dollars a year.
Employees are happy – and more productive. More productivity means restaurants can be run with fewer people and more time can be spent developing employees at a higher level. That translates to better service, hotter food and reduced absenteeism, Graves said.
In turn, managers’ jobs are easier, and management turnover is down by half – less than 19 percent. At the $25,000 it costs to hire and train a manager, Graves said the payoff of investing in employee health care is clear.
About 72 percent of the employees have insurance through Burgerville and 84 percent total are insured.
In the quick-service restaurant industry, the expectation of medical insurance isn’t there, Graves said, and Burgerville sees it as an advantage to recruit the top talent.
“The competition I don’t think sees the possibility of recreating what we’ve got,” he said. “While some have called and asked questions, I don’t think they see the possibility of recovering those dollars – they don’t see beyond that cost. But our restaurant is in better shape than ever and is more productive than ever.”
Megan Patrick-Vaughn can be reached at mpatrick@vbjusa.com.
