If you've ever tried to learn a new concept, you probably appreciate that "knowing" is different from "understanding". When you have an opportunity to apply your knowledge, the lesson typically becomes much more real. Case studies provide an excellent way of practicing and applying new concepts. As such, we've provided below four case studies from some of Zane Benefits' earliest clients.
A 40-Person Employer Converted from HSA to HRA Group Plan
In 2006 this New Jersey employer reduced its annual health insurance premium by almost $100,000 by raising the annual deductible on its fully-insured group health policy to $2,500—while giving each employee a $200/month HSA contribution to protect them against the higher deductible. HSA cash contributions cost this employer $96,000/year during the next 12 months.
In 2007 an employee complained about having to use his own “retirement money” (HSA funds) to pay for medical expenses. The employer switched from making HSA contributions of $2,400/year to giving HRA allowances of $200/month. The employees now received “100% coverage from their employer” and the employer saved $76,800/year because their $96,000/year in annual HRA allowances only cost the employer $19,200/year after 20% utilization.
A 203-Person Employer Converted Group Health Plan to HRA
The employer’s group plan imploded in 2007 after multiple years of cost increases. Participation was down to 50% of employees, with healthier families opting-out to seek less expensive coverage. The company found it difficult to recruit new employees with families due to the high cost of their group plan. The company switched to using an HRA as the complete replacement for their fully-insured group plan—giving generous allowances of $350/month to employees for health insurance premiums and medical expenses. The employer set up onsite “enrollment meetings” for carriers and agents to present personal policy options to employees, and gave double HRA allowances to employees with preexisting medical conditions that needed state-guaranteed coverage.
Today most of their employees have 100% coverage from a personal high deductible policy and their HRA, and the company finds it much easier to recruit workers. In addition to employees receiving 100% coverage, a typical family pays $200/month themselves to cover their dependents instead of the $900/month cost for dependents under the former group plan.
A 150-Person Seasonal Employer using HRAs for Retention and Re-Hiring
This country club had a group plan for their 38 full-time employees and employed 150 seasonal and part-time workers—such as lifeguards in the summer and personal trainers who also worked for other employers. After improving benefits and reducing costs for their full-time employees with an HRA, they explored what they could do for their seasonal and part-time employees.
Their solution? Give HRA allowances based on hours worked, and to suspend an employee’s HRA for 6-12 months once he or she had not worked for a 30-day period (This varied by class of employee). Now, personal trainers who haven’t worked for 30 days are notified that they can no longer submit claims and will lose their entire HRA balance if they don’t bring in a client in the next 150 days. Lifeguards are allowed to use their HRA for 90 days after the summer, and then get their suspended HRA balance reinstated when they return the following season.
A Franchise Owner Needed An Affordable Solution for Franchisees
This national restaurant chain, with 5,000 U.S. franchisees and 3,000 company stores, needed a standardized affordable solution for different labor markets in different regulatory environments. They developed two HRA-powered solutions: (1) A group plan guaranteed issue program and (2) A personal policy pure defined contribution program.
With the group plan HRA program, each store owner or manager obtained their own high deductible, guaranteed-issue, small group plan and used the company HRA to offer a standardized benefits program for the first $5,000/year of each employee’s medical expenses. The owner/manager received a group premium approximately 50% lower than a traditional group plan and offered different standardized benefits for each Class of Employee.
With the defined contribution HRA program, each employee received a fixed monthly or hourly (tied to payroll) HRA allowance. Employees were required to obtain health insurance to participate in the HRA and (mostly) younger employees obtained personal policies at 1/6 to 1/3 the cost of a traditional group plan.