In November 2005, we wrote about the White Stone Group, a Knoxville, Tennessee, firm whose health insurance costs soared after a worker had quintuplets.
The Problem Premiums at White Stone had been going up for years. But nothing prepared CEO Guille Cruze for what happened in January 2004, when one of his programmers, Willem van Tol, became the father of quintuplets. It was a complicated birth and Van Tol's medical bills topped $2 million. A few months later, Cruze learned that his insurance company had raised premiums some 30 percent. Cruze's response: Switch from traditional insurance and instead give White Stone's 70 employees health savings accounts. HSAs allow employees to save money on a tax-free basis to pay for medical expenses; such accounts are used in conjunction with high-deductible plans, which have lower premiums. Many employees were not thrilled about the change. "It was a fundamental change and required an employee mind shift," says Jeff Peters, White Stone's president and COO, who was responsible for implementing the new program.
What the Experts Said Eric Paul, benefits director at Outsource Group, called the HSA plan a winner and White Stone a "smart employer adapting to the changing philosophy regarding benefits." But Aaron Keller, managing principal at Capsule, a branding and design firm, was concerned that workers wouldn't have enough accumulated money in the HSA to pay for immediate needs. Michael F. Cannon of the Cato Institute also expressed reservations: "My fear is that some employees may keep the cash in their HSAs and not go to the doctor."
What's Happened Since Peters says the new health care plan is working well now that employees understand it. White Stone's health insurance costs didn't change in year one, but there was a real impact the following year, when rates went up only 7 percent--the lowest increase in six years. And early indications suggest that employees are saving. A year after the plan was implemented, only 11 percent of employees had no funds in their accounts and one-third of employees had stashed away more than $5,000. Because it's their own money, Peters says, people have been making smarter decisions about how they spend it--opting for less expensive generic prescription drugs, for example.
What's Next White Stone regularly holds roundtable discussions with employees; so far, no one has objected to HSAs, so the company plans to stay the course. Willem van Tol remains on staff. And the quintuplets? Meghan, Willem, Isabella, Ashley, and Sean recently celebrated their third birthday. "It's fun when they all show up at the picnics; they are their own soccer team," Peters says.