ShareThisBy ANNE KRISHNAN
Raleigh News & Observer
Wednesday, May 09, 2007
Executives at The Redwoods Group always thought that the Morrisville, N.C. insurance company's compensation and benefits were fairly generous.
The company paid 80 percent of health insurance premiums for employees and their families. A couple of years ago, it raised its minimum salary to $25,000 a year.
Then last month, CEO Kevin Trapani learned that children in three of his employees' families were on Medicaid.
"We were shocked by that," he said.
It was a simple decision to do something about it, he said. The company now pays the full health-insurance premiums for employees who make $35,000 a year or less, as well as for their children. Workers who make up to $40,000 a year have 90 percent of their premiums paid.
About one quarter of the company's 103 workers are affected by the changes. They process data for Redwoods, gather information and issue policies, bills and invoices.
"We've been blessed with good fortune, and these folks are struggling," Trapani said. "It is our responsibility."
The Redwoods Group's decision to shoulder more health-care expenses is decidedly countercultural, as other companies are shifting the burden onto workers. Many employers are considering high-deductible health plans, which hold down premiums, but require consumers to pay thousands of dollars if they seek medical care.
But more companies are starting to consider how much low-income workers have to pay for medical insurance, said Don Hardin, a senior health-care consultant at Mercer Human Resource Consulting in Charlotte, N.C.
Although companies have tossed around the idea of basing employees' contributions on their income for 20 years, "over the past five years, it has really begun to take hold as employers are seeing more and more of their lower-paid employees waive coverage," Hardin said.
Low-income employees are more sensitive than other workers to higher health-care costs, said Mark Holmes, vice president of the N.C. Institute of Medicine, a nonprofit group focusing on health policy. The fastest-growing segment of the uninsured population is the working poor, he said.
Offering those employees health insurance is a good strategy for attracting and retaining workers in a tight labor market, Holmes said. What's more, employees with health insurance are happier and more productive, he said.
At Redwoods, taking care of employees is part of a larger emphasis on social responsibility. Its business, providing property and casualty insurance for YMCAs, Jewish community organizations and dentists, is aimed at helping customers change their operations to reduce accidents, illness and death, Trapani said.
The company also pays employees to volunteer 40 hours each year at nonprofit organizations and runs internal programs encouraging community engagement. In 2006, the company donated $499,732 to charitable organizations such as Habitat for Humanity and a project focusing on AIDS prevention in Namibia.
Redwoods will spend an additional $30,000 a year to cover the rest of its lowest-paid workers' premiums, Trapani said.
"That's money that will be much more valuable to people who have no question that they can get their kids to the doc if need be," he said. "How do you put a price on that?"
But make no mistake, Redwoods is a business.
The 10-year-old company had revenue of $13.3 million in 2006, up 16 percent, and it reported net income after taxes and charitable giving of $295,381. It underwrote $58 million in premiums, up from about $50 million in 2005.
Strong business basics allow Redwoods to be generous to the local and global community, Trapani said.
"We're a responsible, quantitative, disciplined, hard-working bunch, and we run a company that's going to be here for a long time," he said. "We can't just give away all our money and be a bunch of Birkenstock-wearing, granola-eating guys. That's not how it works."
The company's philosophy is good for business, as well, he said. Its benefits, including $5,000 in annual college tuition for each of its employees' children, contributed to a turnover rate of just 3 percent in 2006. That makes for a knowledgeable group of employees who trust and challenge each other and provide great service to customers, Trapani said.
Redwoods' financial success is building credibility for its business model and winning admirers, he said. Trapani fields calls from other employers interested in Redwoods' initiatives and said he hopes the company's new health insurance structure catches on.
"We have an awful lot of people wondering about this kind of stuff," he said.
(Distributed by Scripps Howard News Service, www.shns.com.)
