self-funded-health-benefits-case-study

You might expect employees who benefit from an employee stock ownership plan (ESOP) to quickly become good health care consumers. When employees save money by making smart health care choices, both the company and the employees (as owners) will benefit financially. But even employees who own the company need help understanding how their decisions impact health plan costs, according to the leaders of Trachte Building Systems, Sun Prairie, Wis.

Trachte is 100 percent owned by the Trachte ESOP. CEO Jeff Burbach noted that an ESOP-owned company is run for the employees. In other words, they “own the horse.” When it comes to operating the business, health benefits, and other programs, Burbach says, “You’ve got to make sure that employees understand that you’ve got to feed the horse and not eat it.”

Rejecting Outside Advice

Shortly after Trachte became self-funded in 2012, it faced rapidly rising employee health plan costs. Outside advisers encouraged the company to solve the problem by increasing premiums, deductibles, and co-payments.

Trachte rejected that advice because the company wanted to manage health care costs, not shift them to employees. Instead, Trachte pursued a three-pronged strategy of:

  1. Consumer education. Health plan choices and costs are covered at open enrollment. In addition, the company’s financials are covered at quarterly ESOP meetings, so employees understand how the company is performing and what is affecting financial performance, which can include health care costs. The company also has a Wellness Team that sponsors events and communications.
  2. Steerage. Trachte uses a third-party administrator’s (TPA’s) concierge service and other resources to guide employees to high-value providers for the top 25 procedures used by enrollees. If enrollees choose a provider who is not on the high-value list, they pay the procedure’s cost difference out-of-pocket.
  3. A high-deductible health plan (HDHP) with a health savings account (HSA). Employee out-of-pocket costs are based on the HSA funding maximum set annually by federal rules. Trachte matches employee HSA contributions at 100 percent up to that level. Weekly premiums are waived for employees who participate in health screenings and complete any recommended coaching. Ninety percent of Trachte employees select the HDHP/HSA plan.

Trachte’s self-funding case study shares other health plan changes that impacted costs. Together, these changes have helped Trachte decrease total health plan costs, even as its workforce has doubled to 215 employees.

Keeping Employees Informed

Ongoing employee education is critical to the health plan’s success, according to Trachte CFO Larry Pribyl, who is also the 2019 chairman of The Alliance Board of Directors

“You don’t go into self-funding without a whole lot of consumer education and structuring your plan such that an educated decision by consumers is supported by appropriate financial incentives,” Pribyl said.

Introducing the plan to new employees is critical. Trachte’s low-or-no premium approach has become a recruiting advantage.

Employees who frequently switch jobs may never see the benefit of being in an ESOP or investing in their health and managing their health choices. But when an employee sticks with Trachte over time between continuous communications and co-workers explaining “the facts of life at an ESOP,” employees gain appreciation of what they have, including the health care program.

Simple Plan Design

Keeping the plan design simple is essential so employees can easily understand the financial impact of their decisions on both their pocketbook and the ESOP’s bottom line. Burbach is wary of “experts” who recommend plans that are “too complicated and too convoluted” to communicate clearly.

“Self-funding gives you an opportunity to have real control over the plan design,” Burbach said. “And if you have enough control over the plan design, you can pull together a program that’s simple enough for people to understand and to intelligently use.”

The success of Trachte’s self-funded plan in holding down costs and increasing earnings helped win over doubters. From 2010 to 2018, Trachte tripled its sales and increased profits.

Shared Success

Employees directly benefit from Trachte’s success in three ways:

  1. Competitive compensation and benefits, including the health plan.
  2. The opportunity to earn an annual cash bonus based on the company’s year-end performance.
  3. Building wealth by earning a “share award” in the ESOP, with shares paid out when vested employees leave the company. Trachte also matches employee 401(k) contributions at 100 percent up to 6 percent of earnings.

Health plan costs have a significant impact on the cash bonus and ESOP’s share value. With ESOP payouts reaching six figures for long-term employees, Burbach and Pribyl said there is a built-in incentive for employees to take health costs seriously.

“We have made good progress on growing our ownership culture,” Burbach said. “The health care consumerism that our self-funded health care program has developed is an important part of the employee engagement that is critical to that ownership culture.”

Learn More

Melina Kambitsi, Ph.D.

Melina Kambitsi, Ph.D.

SVP, Business Development and Strategic Marketing at The Alliance
Dr. Melina Kambitsi joined The Alliance in 2017 and leads the team responsible for membership growth and retention of the cooperative. Dr. Kambitsi comes to The Alliance from Network Health in Milwaukee and Menasha, Wis. where she was chief sales and strategy officer. In this role, she was responsible for sales and underwriting, strategic planning, product development and risk-based contract analytics. Earlier she was senior vice president of sales at Blue Cross Blue Shield in Honolulu, Hawaii and the vice president of sales, marketing and product development at Blue Cross of Northeastern Pennsylvania.

Dr. Kambitsi received her bachelor’s in international studies and her master’s and doctorate degrees in economic geography at The Ohio State University. She speaks Greek fluently as well as four other languages (Spanish, French, Romanian and Russian).
Melina Kambitsi, Ph.D.

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