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Industry Opts for Alternative Health Plans

Published November 30, 2009


SEYMOUR, CT—While lawmakers are busy working on health care reforms in Washington, D.C., suppliers and retailers are also busy—trying to figure out the best way to give their employees quality medical benefits while eyeing the bottom line.

If that sounds like a tough task, well, it is. Health insurance premiums are going through the roof, with double-digit increases often the norm.

To alleviate these rising costs companies such as Thule USA are ditching more common PPO (Preferred Provider Organization) and HMO (Health Maintenance Organization) plans for HRAs (Health Reimbursement Arrangements). HRAs are IRS-sanctioned programs that allow an employer to reimburse medical expenses paid by participating employees.

Thule offers its 500 employees two plans: one with a $3,000 deductible and another with a $6,000 deductible, according to Maureen Parente, vice president of human resources for Thule USA. The company pays half of those deductible amounts for its employees, giving Thule employees up to $1,500 and $3,000, respectively before they have to incur any medical costs.

What makes HRAs even better is that preventive health care like routine physicals and mammograms don’t count toward that total amount, Parente said.

“Almost every company is going this way,” Parente said. “It makes people more accountable for their health care.”

Parente said that under the company’s former PPO plan, Thule faced 32 percent annual increases in premiums. Now, with HRA plans, it’s under 10 percent.

Northern California-based WTB is getting creative with its medical benefits as well. Besides HMO, PPO and Kaiser plans, WTB also offers its employees an HSA (Health Savings Account) option, said Susie Weaver, who heads up WTB’s legal affairs and human resources department.

An HSA is an account into which pre-tax money is placed by an employer or an employee to pay for the employee’s ongoing medical expenses.

While only three of WTB’s 19 employees currently have an HSA plan, according to Weaver, the company might consider completely shifting in favor of HSAs in the future. “It would save us $40,000 if we switched over to the HSA,” Weaver said. “It’s not just more economical, it’s better coverage, offering employees more latitude.”

Weaver said that an advantage to the HSA plan is that if an employee doesn’t have any medical expenses in a certain month, the money rolls over to the next—adding up with tax-free interest over time.

WTB is very generous with its medical benefits, paying the full 100 percent for each employee who chooses the PPO or HMO plan. The company has seen its health care costs rise 13 to 18 percent in the last couple of years. “It’s a huge portion of our operating costs,” Weaver said. “But it’s very important to us.”

Retailers are also trying to lessen the impact of costly premiums. To rein in rising health care costs over the last couple of years, Southern California-based Two Wheels One Planet has made changes to who can receive benefits. The shop offers benefits only to those who are full-time or have worked for the company for at least a year.

Owner Michael Mulrooney admits that his business is running out of ways to keep these staggering premiums at bay. But while he has many choices for health care plans, one choice he and others don’t have is to go without. “In order to compete for people you have to offer medical insurance,” Mulrooney said.

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