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Company gets creative to keep full cover in place


For Linda Pace, there never was any question about whether to provide full company-paid health coverage for employees of her Billerica, Mass.-based restroom hygiene product company. The only question was how.

"I came from nationalized health in the United Kingdom and I just felt, how could we possibly think of not offering 100%," said Ms. Pace, president and chief executive officer of Workplace Essentials Inc. that employs about 70 people.

But when premiums started to escalate, Ms. Pace said she found that the only way to maintain that commitment was "to get really creative."

In 2003, the company was paying $337.12 per month to Tufts Health Plan for individual coverage and faced a 17% increase for 2004, she said.

Thus, the company shopped for a lower rate and switched to United HealthCare at $311 per member per month in 2004. UHC's rate grew 2% in 2005 to $316.94. For 2006, the insurer's renewal rate would have jumped 30%, Ms. Pace said.

By that time, she had huddled with consultants who offered a new strategy to stretch the company's health care dollar. By partially self-funding medical claims, Workplace Essentials would get a much better rate and could use a third-party administrator to handle claims. Plus, the company could limit its exposure to high claims or high utilization costs by purchasing stop-loss insurance.

But first, Ms. Pace and her husband, also a business owner, had to pool their employees to create a separate corporation, Workplace Personnel Management, which handles worker payroll and benefits. Her employees are predominantly female while his 10 workers are mostly male, "and just that little mix helped to give us a better rate," explained Ms. Pace. She was told that adding men, who use health services less than women, would improve the group's demographics.

By funding claims and the cost of insurance premiums themselves, small companies can realize significant savings in plan assets over time, said Jed Brettschneider, president and CEO of HMA Direct, the Newton, Mass.-based insurance and actuarial consulting firm that assisted Workplace.

"For a small company like Workplace with only 75 or 80 full-time people on the benefit plan, they have been able to successfully accumulate 30% to 40% of their annualized total costs--the total cost of health care--several years in a row in plan surplus," he said.

The company's rate of $358 a month per member rose just $2 a month in 2007, Ms. Pace noted. Employees have a $15 copay for a doctor's visit an d a $25 copay for a specialist visit--unless the care is preventive and, thus, free to the employee. Employees also pay an annual deductible of $250 for an individual and $750 for family coverage. On the other hand, the company has added free generic drugs as a perk through Costco Wholesale Clubs and discounts on brand name prescriptions by mail.

What's more, Ms. Pace credits the company's health benefits with helping to curb turnover. Today, more than 50% of her employees have been with the company more than five years.

"I think we've got something which is quite good," Ms. Pace said, "and it's the whole package."