Case Study: Local Firm Uses HSA Strategy to Reduce Healthcare Costs

Originally Published in RMP Advisor, April 2009

by David Edman

Return to Newsletter Archive

Horsham Veterinary Hospital

Client Overview
The Horsham Veterinary Hospital (HVH) is a full-service animal healthcare facility located in suburban Philadelphia. In 2006, after 20 years of providing outstanding care to a growing group of loyal pet owners, HVH moved into a brand-new 12,800-square-foot facility with over 50 employees, including doctors, technicians, groomers, and other animal care-specialists.

Health Benefits Challenge
In the five years leading up to its 2008 health insurance renewal, HVH was burdened by cost increases of 15% to 20% each year. HVH could no longer bear these increases, and was looking for a strategy that would allow the Company to continue providing its employees with health benefits at no cost (for single coverage). HVH also wanted to avoid layoffs as the economy deteriorated in late 2008 and into 2009, and keeping health insurance costs under control is essential.

Solution
Risk Management Partners LLC was brought in to help HVH develop a multi-year strategy for HVH to gain control over its health benefit costs while still meeting its employee relations objectives. The Company took the following steps:

• Introduction of a new carrier with a Health Savings Account (HSA) option for its employees.
• Establish the HSA as the ‘no cost’ option for the employees, with HVH contributing $780 to a single employee’s $1250 deductible.
• Allow employees to choose a traditional PPO plan and bear the additional expense.

All eligible employees elected the HSA option, and HVH experienced a 6.1% increase in its health benefit costs. The employees each received a monthly deposit into their HSA bank account throughout the year. There was some ‘fear of the unknown’ as HVH began its new policy year.

Impact On HVH And Its Employees
Statistics provided by the carrier showed that 70% of the employees spent $500 or less during the year. As a result, most employees carried money over into 2009. They are more engaged in their health decisions, are asking about the prices of services, and are enjoying the tax advantages of the HSA model. For its 2009 policy renewal, HVH was able to consider its options around three decision points:

• Whether to change carriers (HVH decided NO).
• Changes to the insurance policy deductible (increased from $1250 to $2000).
• Changes to the Company’s its HSA contribution levels (increased to $100/month or $1200 for the year).

The cost increase to HVH for the year was 7.8%–it could have been as low as 3.5% without cutting benefits, but they wanted to be generous to their employees. And, the employees are happy. They receive cash into their HSA for the first $1200 of the healthcare needs, knowing that most employees will spend less than half of that amount. It is a ‘win-win’ for HVH and its employees.