MEDFIELD, Mass.—April 7, 2003—Genalco, a supplier of specialized equipment for the construction industry based in Needham, Mass., near Boston, faced a forbidding $40,000 hike in health insurance premiums from its HMO this year to cover its 43 employees—a 20 percent increase over 2002.

Company president Joe Mulcahy was reluctant to accept those terms, especially since the plan didn’t offer much for the money: It carried a $250 hospital admission co-pay and required a doctor’s referral for every appointment.

“It’s a constant challenge to contain health care costs and offer quality benefits that employees appreciate,” said Mulcahy. “That’s why for 2003, we enrolled in Benemax’s consumer-driven health plan. Our employees can choose their own health care providers—that’s at the top of their wish list—and we reduced costs by 10 percent.”

“Like countless small and mid-sized businesses, Genalco is looking for ways to preserve rich health benefits and keep costs in line,” said Benemax co-founder David Cowles, who will present practical guidelines today at the Consumer Directed Health Care Conference and Expo in Las Vegas during his session, “Kinder, Gentler Consumer-Driven Health Plans—Strategies for Gradual Implementation and Minimal Cost Shifting.”

Genalco is the beneficiary of such a “kinder, gentler” plan. Benemax designed a package based on a Blue Cross/Blue Shield plan that has a $3,000 annual medical deductible and a $250 annual prescription deductible. But employees do not assume responsibility for the full amount of these deductibles.

That’s because Genalco has established tax-free Health Reimbursement Accounts (HRAs) to help employees manage their medical expenses. The company allocates $500 per year for single employees, $1,000 for two-person families and $1,500 for families of three or more. Claims for health care services and prescriptions are first reimbursed from the employee’s HRA. Once HRA funds are exhausted, the patient is responsible for the next $250 in claims cost. After that, Genalco picks up 100 percent of the claims tab until the deductibles are met. This way, the maximum annual out-of-pocket expense is just $250 per member.

Best of all, employees who have funds remaining in their HRAs at the end of the year can carry them over to the following year and add them to Genalco’s new allotment for that year, building up a benefit bank to cover future years’ health care costs.

“Doctors and patients are the best judges of the proper course of treatment, and the opportunity to build a benefit bank encourages prudent health care decisions,” said Cowles. “Consumer-driven plans show employees the real cost of care and allow them to determine how best to use their health care dollars.”

About Benemax
Benemax, based in Medfield, Mass. (www.benemax.com), was founded in 1985 and manages employee benefits for clients ranging from start-ups to divisions of Fortune 500 companies. The company designs and administers attractive yet highly cost-effective employee benefit packages, including consumer-driven health and dental plans. The company grew by more than 35 percent in 2002, the third consecutive year of over 35 percent growth.