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Manufacturing firms fighting rising healthcare costs

When Darrell McNair, president and CEO of MVP Plastics Inc., went to renew the company's healthcare plan for 2016, he learned that the renewal rate for an unchanged plan would mean an 11% increase.

He had his provider look into what it would be if he abandoned the plan and went to the Affordable Care Act marketplace. McNair learned that the best deal would still increase his premium, as well as the co-pays and deductibles for employees.

He decided to stick with his original plan, because he didn't think the alternative was good for workers.

“I don't like it,” McNair said. “It unfairly burdens employers and employees.”

It's a familiar story for business owners, who have been struggling to keep up with rising health insurance costs. And manufacturers in particular point to those increases as a concern.

The most recent outlook survey from the National Association of Manufacturers listed rising healthcare-related costs as the second-largest “primary” business challenge, behind only unfavorable business conditions. But local companies say offering health insurance and other benefits gives them a competitive advantage when it comes to retaining employees, so it's a challenge they have to tackle.

The rising cost of healthcare has led companies to try a few different tactics, said Steve Ligus, vice president of employee benefits at insurance brokerage Hylant Group Inc. in Independence.

Some have increased limits, while others have started offering more choices of plans for employees. While there was fear that companies would stop offering insurance, that hasn't borne out.

Companies have been moving toward a model where employees act more like consumers when they go to the doctor, instead of just going ahead and getting a lot of tests done, said benefits consultant Dan Bilek of Solon-based human capital management firm CPI-HR. Northeast Ohio was a pretty early adopter of some of the alternative plans, including health savings accounts, or HSAs, he said.


Multiple options

At cutting toolmaker E.C. Kitzel & Sons Inc. in Cleveland, the company offers employees a choice between an HSA plan with lower premiums, a standard deductible plan and a higher deductible plan, said president Tom Schumann.

Employees on the lower deductible plans pay the difference over 12 months, and the company makes a payment to employees who choose the HSA, because the premiums are lower for Kitzel.

Schumann said he's looked into ACA compliant plans a few times, but they're substantially more.

The company, which has about 32 employees, will be required to make the switch in 2017, he said.

The Technology House in Streetsboro also offers multiple plans — one in which rates increase and the other with higher co-pays, said CEO Chip Gear.

The prototyping and production company, which HR/payroll manager Nicki Gear said has about 76 employees total and 55 on its health insurance plan, has been offering this since 2010.

Ligus said aside from these more familiar options, there's been greater interest in self insurance, in which an employer pays insurance claims as they come up, rather than trading premiums for assumption of risk. Historically, this is something companies with 100 to 150 employees or more would start to explore.

But that limit has “come down considerably,” Ligus said, and companies of all sizes are looking into it.

One of those companies was custom injection molder MVP Plastics in Middlefield.

McNair said he started looking into it for this year, though he's opted to not make that change, as long as his company is grandfathered in. But McNair said he would opt for a self-insured model before going to the marketplace. The company has about 70 insurance-eligible employees, with about half who use it.


Something wild

Self-insuring has become more realistic with the increases in healthcare, said Pradeep Saha, CEO of Cleveland-based gear maker Horsburgh & Scott.

He has looked into it in the past and said he plans to research it again in 2017. The company has about 160 hourly and salaried employees.

Horsburgh & Scott has seen “significant” increases the past two years, Saha said.

Both years started out in the double digits, but the company was able to get this year's increase reduced to 7% or 8%.

It makes a big impact, because it could add up to $10 off a paycheck.

“That's real money,” he said.

Pipe, tube and roll form tooling maker Roll-Kraft in Mentor took a creative approach to its insurance in 2015-2016 with a shared funding plan, said president Sanjay Singh.

He referred to it as a quasi-self-insured plan, where they signed up for high deductibles and lower premiums. The coverage offered to the nearly 100 employees on the plan, as well as their rates and contributions, looks the same.

The company's broker looked at Roll-Kraft's claims and told them they were paying a lot in premiums, Singh said. Under this plan, they took on some risk, but it worked out, though he expects prices to rise in May because prescription prices have been increasing.

Health insurance plans are difficult for a company to plan for, Chip Gear said, adding that his insurance company has been good about prepping him for changes.

“Medical, we go in and it's a wild card,” he said.

But it's also one of the most important things the company does to keep employees, Gear said, though it does affect the company's ability to give pay raises.

Nicki Gear said the company wants to keep offering auxiliary benefits, but if prices continue to increase, they will have to look into whether it's worth offering options like dental.

Singh of Roll-Kraft said offering benefits is critical for retention.

He said he recently received an application from someone who was looking to change jobs because his employer decided to stop offering insurance.

“We're a growing company,” Singh said. “We want to retain people.”


"Manufacturing firms fighting rising healthcare costs" originally appeared on the website of Crain's Cleveland Business.


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