Rightway Imaging is a health care organization with 400 employees and 20 locations in the metro area. For 30 years they’ve 
competed with St. Andrews Medical Network, a much larger organization of 30,000 employees. The competition is fierce not only for patients and market share, but also for recruiting and retaining skilled employees. Lately, the battle has become one-sided.
St. Andrews Medical Network buys their health insurance in bulk. At the time of their annual renewal period they come to the table with 30,000 employees, the essence of having leverage in a negotiation. Conversely, Rightway Imaging braces for their annual renewal months in advance, and although 400 employees is a significantly sized company, their health insurance premiums are much higher, an increase at a higher rate than their competitor. With this being the case, they’re still managed to mirror the employee benefit policies of St. Andrews in order to stay competitive, but it comes at a heavy cost to their bottom line.
In 2010 when Healthcare Reform took its toll on health insurance premiums, Rightway Imaging saw a 42% increase in their medical insurance costs. An extremely difficult decision loomed, drastically reduce the quality of their employee benefit package and play second flute in the local competition for skilled employees, or seek alternative methods of procuring health insurance, a territory that until this time has not been explored.
Enter the PEO…
Rightway Imaging had never looked into outsourcing HR before, but realized it was time for a change. 2010 was a period of rapid expansion for the organization as it was completing a series of acquisitions of smaller practices, and bringing on groups of 10-30 new employees by the week. The combination of pressure from medical insurance increases and added HR exposure created an opportune environment for a PEO to add value.
The Professional Employer Organization was able to offer Rightway Imaging four healthcare plans, two that mirrored the Cadillac plans that were already in place, and two other plans including a High-Deductible Health Plan. They created a benefit contribution strategy that was fair for the existing employees as it rewarded tenure with less out of pocket expenses, while also driving new employees to lower cost plans tied into an HSA, a strategy proven to lower claim ratios.
The medical increase from the group was reduced from the original 42% to an effective 8% increase. Applying these percentages to a company of 400 employees and the PEO saved the company about $780,000 in medical premiums, more than enough to offset their administrative fees. The Professional Employer Organization was able to accomplish this because they too, buy their benefits in bulk. Instead of purchasing health insurance for 400 employees, like Rightway once did, or 30,000 employees, like St. Andrews still does; the PEO purchases benefits for over 100,000 employees, and the discounts are passed directly to their clients.
In addition to the savings in medical premiums, the PEO also provided the necessary HR support so that an HR team of two individuals can manage a growing group of 400 employees a lot more efficiently, and in total HR compliance.
Today, Rightway Imaging still competes with St. Andrews Medical Network for patients, potential acquisitions, and skilled employees. They are still able to offer rich benefit plans like they always have, and they can still keep employee out of pocket expenses low. In addition there is more choice and flexibility in other benefit programs such as Dental, Life Insurance, FSAs, even an employee perks program. A PEO was able to provide this improvement in employee benefits and Human Resources, while still creating an overall cost reduction for Rightway Imaging, we call this a win-win!
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