Subject: Small Hotel Company Cuts Health Bills Down to Size
Date: Published: 3/26/93 (121 lines)
Source: Wall Street Journal. Copyright Dow Jones & Co. Inc.

    Enterprise:
    Small Hotel Concern Cuts Health Bills Down to Size
    ---
    Camberley's Shift to Self-Insurance
    Reduces Premiums and Turnover
    ----
    By Udayan Gupta
    Staff Reporter of The Wall Street Journal

    ATLANTA -- Many small companies offer skimpy health insurance
 coverage -- and insist that their workers bear most of the cost.
    But Camberley Hotel Co., a small hotel management concern here,
 has discovered that a health care plan covering most of its nearly
 600 employees can be healthy for business.  Its plan, introduced last
 year, costs workers a small fraction of what they used to pay and
 has helped to sharply improve morale and reduce turnover, officials
 say.  And at a time of rising health insurance premiums, Camberley's
 insurance expenses have dropped.
    There may be no single solution in the nationwide drive by
 government and business to plug gaps in workers' health coverage.
 But Camberley's experience suggests that careful use of existing
 tools could be an effective way for small businesses to improve
 employees' coverage and lower insurance costs.
    Unlike many small employers, Camberley insures itself for most
 health care bills.  Self-insurance allows greater flexibility, better
 coverage and greater savings, says Parry Goodman, president of
 Benefit Management Corp., a benefits-plan administrator in Fort
 Lauderdale, Fla.  Camberley covers catastrophic injuries and
 illnesses through an outside policy.  In addition, the company limits
 coverage for injuries or illnesses arising from certain dangerous
 activities outside the workplace.
    The result:  Camberley, which says it has annual revenue of about
 $35 million, spends less for health care coverage.  Health costs now
 represent only about 6% of Camberley's total payroll -- down from
 7.9% in 1991 and less than the average of 8% to 14% for other hotel
 management companies, big and small.
    The company's monthly costs averaged $140 an employee last year,
 down from a high of about $142 in 1991.  That's below the $167
 monthly cost per employee for a full insurance plan in Atlanta and
 below the nation-wide average monthly cost of $158 a month,
 according to a survey by Hay/Huggins Co., a benefits consulting firm
 in Chicago.
    Small companies historically have paid dearly to provide health
 care coverage for employees, says Marie Dufresne, a Hay/Huggins
 senior vice president.  "It is more expensive because there are fewer
 people to share the risk."  Moreover, insurance carriers often poorly
 design programs for small corporate clients.  "There's no management
 of care, and there's no control of cost," Ms. Dufresne says.
    Camberley says its different approach partly evolved from close
 monitoring of employee needs at the five hotels it manages in
 Atlanta, Tampa, Fla., Louisville, Ky., and Toronto.  Kimberly Bavali,
 vice president of human resources, says Camberley surveys all its
 workers twice a year about their confidence in the company, their
 benefits and their supervisors.  Ian Lloyd-Jones, the company
 president, regularly meets with a cross-section of employees in each
 city to discuss their problems.
    The insurance problem surfaced at one such talk with workers in
 late 1991, Mr. Lloyd-Jones recalls.  A chambermaid, a single mother
 with three children, told him that she couldn't afford to pay the
 premiums for the company-provided health insurance.  Mr. Lloyd-Jones
 says he soon learned that many employees needing coverage couldn't
 afford to pay the premiums demanded by its various health plans,
 which differed from hotel to hotel.
    The chambermaid's complaint spurred a top management review of
 Camberley's health care coverage.  One problem detected was a lack of
 consistency.  Some hotels had a conventional insurance plan while
 others offered coverage through health maintenance organizations.
 Also, the quality of care was uneven and the cost -- an average of
 $142 a month -- was too high, especially for lower-paid employees.
 Every employee at each hotel had to pay the same premium for a
 particular plan, regardless of ability to pay.
    So, in 1991, Camberley introduced a single plan covering all
 employees and switched to self-insurance.  Under the new program, the
 company deposits enough money each month in an interest-bearing
 account to cover employees' projected medical costs.  Camberley
 purchased separate insurance to pay for catastrophic care -- such as
 for premature births, cancer and AIDS.  
    Camberley hired Benefit Management to manage its entire health
 insurance program.  The company pays Benescript Services Inc. of Salt
 Lake City to handle prescriptions; employees pay $10 for each
 prescription filled.  For those requiring medicines on a long-term
 basis, the company provides a mail-order drug program that costs
 employees $5 a prescription.
    Camberley executives say they also encourage employees to be
 "smart consumers" of health care.  Human-resources staff members
 explain the program to each new worker, many of whom are recent
 immigrants.  The company asks employees to shop around before
 choosing a medical provider and reimburses them for securing a
 second opinion before elective surgery.
    In addition, managers and employees agreed on a set of practices
 that aren't covered by the health insurance plan.  Injuries suffered
 from bungee jumping, parachuting, sky diving and scuba diving are
 not covered; neither are injuries from accidents in all-terrain
 vehicles.  There also is a $5,000 limit on medical bills for injuries
 from drunken driving and illicit drug use.  "Why penalize everyone
 for the whims of a few?"  Mr. Lloyd-Jones asks.
    In return for such restrictions, employees pay no more than 2% of
 their base salary in annual premiums.  For example, a maid earning $6
 an hour pays no more than $9.60 every two weeks.  There's even a
 weekly cap of $25 for the highest-paid workers.
    About 64% of employees at the company-managed Brown Hotel in
 Louisville enrolled last year, up from 45% the year before.  At the
 Terrace Garden Hotel in Atlanta, enrollment rose to 67% in 1992 from
 51% in 1991.
    And employee turnover, a major hotel industry problem, is
 shrinking at Camberley.  It dropped to 4% a month at Brown from about
 4.6% in 1991 and to 5% from about 5.7% at Terrace.  Industry-wide,
 the turnover rate last year was about 12.5% a month, experts note.
    Camberley's new health care plan wasn't the only reason turnover
 fell, but "it is an essential component in the human-resources
 equation," says Mr. Lloyd-Jones.  He adds:  "We're setting a tone for
 what we want to offer our employees."

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