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The Best Practices Guide: Taking the High Road

Why Jewelers Mutual absorbed a 30 percent increase in health insurance costs

When Jewelers Mutual Insurance Company received a whopping 30 percent increase in health care premiums, they did something remarkable. Instead of increasing employees' costs, the company actually increased employees' benefits and kept the premiums the same.

"We had level premiums for the last three years. When we were faced with a 30 percent increase this year, we decided it would be the same as a 10 percent increase for three years, which is pretty typical. Employees are our number one asset, and this is an important benefit. So we decided to absorb the increase," Connie Rank-Smith, the organization's vice president of human resources, explains.

In addition to keeping employee costs level, Jewelers Mutual took the following steps to cut health care costs and improve the benefit.

1. Analyzed deductible use. At the time, the company paid the first $500 in costs. The next $1,000 was the deductible. "We learned that 40 percent of employees never used up that first $500 that was company paid," says Rank-Smith. Through focus groups, they also learned that the $1,000 deductible all at one time was a challenge for employees.
2. Changed deductible and added health reimbursement account. The company's broker recommended a new arrangement with a split deductible and a health reimbursement account (HRA). The first $500 is a deductible. If an employee doesn't use up all of his or her $500 HRA, 50 percent of the unused funds roll over into the next year. The third tier is another $500 deductible. As a result, the deductible didn't increase but was split into two separate deductibles.
3. Held focus groups. "We tested the waters with a few focus groups," Rank-Smith explains. Employees liked—and understood—the new concept.
4. Expanded PPO network. This helped employees avoid higher out-of-pocket expenses.
5. Increased wellness benefits. In addition to its already robust wellness program, Jewelers Mutual added several new on-site services: biometric screenings, nurse visits and Weight Watchers. They also removed the cap on their annual wellness benefit.

The company made sure to let employees know about their decision to absorb the cost increase—and even improve the benefit. "It was one of the first employee benefit meetings I've been in where there was applause," laughs Rank-Smith.

"It was one of the first employee benefit meetings I've been in where there was applause."
– Connie Rank-Smith, vice president of human resources, Jewelers Mutual Insurance Company

Nearly half of employers in a Watson Wyatt survey currently offer (or plan to offer next year) financial incentives to encourage workers to improve their health. By 2009, that number will likely surpass 70 percent.
– 2007/2008 Staying@Work survey, Watson Wyatt

What can you learn from Jewelers Mutual?

• Look at how employees use the benefits. Do plan designs, deductibles and networks help—or hinder—employees?
• Focus groups can show how employees might react to benefit changes.
• When your company absorbs cost increases, tell employees! You'll boost morale and receive some well-earned appreciation.

About Jewelers Mutual

Find out more about their benefits in Jewelers Mutual's winner profile.