By Sam Shallenberger, CFO, RJ Young
When it comes to office equipment and innovative document solutions, RJ Young is an expert, but when it comes to employee health benefits, the Nashville-based company knew it was out of its element and needed some help.
Using its famed “We make it right,” guarantee for its customers, RJ Young was determined to use the same approach of making it right when choosing an employee health and benefit program.
Founded in 1955, RJ Young has provided an employer-sponsored health care benefits program since the 1970s to its diverse workforce. Today the company employees more than 350 people. The employee population features: commissioned sales people, hourly administrative, and logistics professionals, which includes highly specialized service technicians.
However as the company continued to grow, with its corporate office in Nashville and 16 sales and service satellite locations, RJ Young was outgrowing its health care benefits program. The company offered the traditional health maintenance organization (HMO) package and later began providing a preferred provider organization (PPO) benefit package.
Employees choose from several tiers of coverage, selecting a payroll contribution level, annual deductible, co-insurance, and copay from a matrix. RJ Young was self-insured with stop loss coverage for large specific and overall claims. However what was working before in regard to employee health benefits 20 years ago was not working now for the company, which was determined to make right on its guarantee.
As health care costs began skyrocketing, RJ Young began feeling the numbers crunch. The rising cost of health care was making RJ Young’s c-suite executives see red and it wasn’t the color toner in the Canon and Ricoh copy machines the company was selling.
Something had to be done. Would the company have to stop providing employees with health care coverage? Should RJ Young end its long-time partnership with the brokerage firm? These were just some of the questions the company was facing. The situation became more dire as the economic recession swept across the nation.
In 2007 new CFO Sam Shallenberger became involved in negotiating the annual renewal of health care benefits with RJ Young’s brokerage firm, which had written the business for many years and also provided property and casualty lines.
“The discussion each year was what I came to call the ‘Good News/Bad News’ meeting,” said Shallenberger, who joined the company in 2006. “Every year, the broker would tell me ‘The bad news is, the industry is experiencing double-digit increases this year. The good news is, we expect your increase to be only X with X variously 8 percent, 11 percent, or 9 percent each year.’”
This was no longer acceptable. The company was seeing its expenses growing faster than the revenue. The rising cost of health care was directly affecting RJ Young’s bottom line.
“The ‘good news’ was going to kill us if we did not act,” said Shallenberger, who began searching for an alternative and began investigating the concept of high-deductible health plans with a health savings account (HSA).
When it came time to renew, Shallenberger asked his long-time broker about starting a consumer-directed health plan. The idea was quickly shot down. The broker advised Shallenberger that RJ Young’s employee population would not accept an HSA. The broker claimed the workforce was “too blue collar” and that the engagement rate for an HDHP/HSA plan would be too low to make a difference in controlling the expense.
In 2008 and 2009 RJ Young continued to experiencing higher and higher health care costs. Shallenberger once again brought up the idea of consumer-directed health care, but the broker again advised against implementing the plan.
“Instead, we would nibble at the margins,” Shallenberger said. “We would introduce a third prescription drug copay tier, fiddle with the deductibles and employee contributions, but nothing that impacted our annual spending significantly.”
After two years of seeing its health care spend steadily increase, the status quo was no longer acceptable. A solution had to be found and that came in the form of Alex Tolbert, a broker with Nashville-based Bernard Health, who got in touch with Shallenberger in the spring of 2010 and believed he could solve RJ Young’s problems. Unlike the other broker, Tolbert believed the company’s workforce, blue collar or not, would readily accept an account-based health plan.
“What stood out from that discussion was Bernard’s confidence that RJ Young could introduce a consumer-directed plan and capture significant savings, while continuing to provide a quality benefit to our team,” Shallenberger said.
Over the next few months, Bernard began educating RJ Young’s executives about the benefits of implementing a CDHP and what kind of communication plan Bernard would implement that would result in a high engagement percentage with the employee population.
However what seemed to be a daunting task of changing health plans became relatively easy.
“We did not make the decision until all members of our leadership team could articulate the value we expected to receive from the change,” Shallenberger said. “We were introducing a simple plan that seemed complicated only in comparison to the prior plan. We were able to explain our plan in one paragraph.”
The one paragraph referred to the employee-only plan RJ Young introduced. It read: ‘Preventative care is 100 percent covered. Care in excess of $2,500 per year is covered. You are responsible for care between $0 and $2,500. We give you $900 each year toward that care, and the money remains in your personal HSA if you don’t use all of it.’
The annual contribution was determined after examining the projected savings, and determining a split between company expense reduction and contribution toward the employees’ new higher deductible.
“We initially set the amounts when we were concerned about take rate for the new plan as opposed to the traditional plan,” Shallenberger confessed. “We expected to offer the traditional plan as an option, but hoped that with education, the majority of employees would select the HDHP/HSA plan.”
However that planned changed when CEO Chip Crunk, impressed with how much money the company would save by scrapping the traditional health plan, elected to go with a full CDHP replacement. The decision made choosing a health plan much more simple and benefited both the employees and the company.
“The HDHP/HSA plan is better for the employees and better for the company,” Crunk said. “The only risk is that they will select the wrong plan or fail to understand the new plan. Therefore the new plan will be our only option, and we’ll provide the education the employees need to understand it.”
With the HDHP/HSA plan now the only plan RJ Young would offer in the coming year, open enrollment began. RJ Young produced numerous newsletters and updates informing employees of the changes.
Bernard Health participated in more than a dozen in-person training sessions at the RJ Young locations so every employee could learn about the plan and ask questions.
Additional sessions were scheduled three months and six weeks after adoption to further assist employees with the changes.
It was a seamless transition, thanks to Bernard’s BerniePortal, an online benefits enrollment software that helps employers save time and money and gives the organization peace of mind and makes benefits sign up for employees easy and simpler without having to use paper.
Bernard Health also produced a 20-minute BerniePortal webinar to aid employers in educating their employee population on how to use the online portal during open enrollment.
The BerniePortal proved to be beneficial as Bernard Health saw 81 percent of their clients use the benefits administration process online when going through a full HSA replacement.
Bernard’s clients, including RJ Young, cited four main advantages of using BerniePortal:
- Save money: moves complex paper business processes online
- Save time: cuts down on mistakes and time-intensive effort of filling out paperwork
- Peace of mind: eliminates liability associated with paperwork errors
- Happier employees: no one likes filling out insurance paperwork
“We didn’t have to struggle with Blue Cross Blue Shield of Tennessee paperwork, supplemental insurance paperwork, HSA Bank account setup paperwork, or any of the other forms we’d used in the past,” Shallenberger said. “We pointed our employees to BerniePortal and they just signed up.”
After the first year, it was time to take a score and see how efficient the move to full-replacement HDHP/HSA had been for RJ Young. During the inaugural year, RJ Young’s expenditures were $900,000 less than the traditional health plan proposals. Of the company’s total expenditures, $400,000 were contributions to employee’s HSAs.
Employee’s total expenditures for medical care were $200,000 below the prior period, but some of the prior period costs were difficult to capture.
“They probably saved even more, but we went with the number we could document,” said Shallenberger, who added the full conversion to an account-based plan helped avoid substantial increases in medical cost. “The beauty of the contribution is that it is not subject to medical inflation. Even if we begin to experience premium increases, a substantial portion of our annual expense need not increase at that rate.”
The good news continued for RJ Young.
After the first year, provider Blue Cross Blue Shield of Tennessee’s offered the company a renewal quote that was 1 percent below the first planned year. BCBST’s statistics also illustrated RJ Young’s employee population paid less per prescription than the carrier average and received more preventive care.
Enjoying better health care access and a cheaper price, RJ Young’s employees were extremely satisfied with their new health care benefits, proving change is sometimes a good thing.
“This was quite a leap for RJ Young,” Shallenberger said of the health care transformation. “We don’t make changes lightly. But we have met our goal of reducing this expense, continuing to provide a valuable benefit, and setting a framework that will allow us to cope with the changes we expect to face in the decade ahead.”
About the Company:
RJ Young Company is the fourth largest independent office equipment dealer in the United States. RJ Young has over 350 employees and provides award-winning service and support throughout the Southeastern United States, backed by their exclusive, We Make It Right Guarantee.
About the Author:
Sam Shallenberger joined RJ Young as chief financial officer in 2006. Shallenberger is a CDIA+ Document Imaging Architect, a Certified Mergers & Acquisitions Advisor, earned an MBA from Vanderbilt University, and a Masters of Accounting from University of Phoenix. Prior to joining RJ Young he was CFO for two technical systems integrators, and he serves on the boards of several local companies. Beginning in 2011, Shallenberger advises Bernard Health as an employer advocate.
Note: Todd Callahan, the editorial director for The Institute for HealthCare Consumerism contributed to this article.
