Our Perspective. The HSA Decision

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1 HSA Adoption Case Study: How Hormel Foods Corporation Achieved Exceptionally High Enrollment Rates with HSA On Demand, Strategic Plan Design and Effective Communications Hormel Foods Corporation (Hormel), a multinational manufacturer and marketer of consumer-branded food and meat products, recently faced benefit challenges shared by employers across the country. Rising health care costs compelled the company to look for a strategic change that would not only help manage costs, but would also help the company forge a partnership with employees in managing their health. Hormel executives were attracted to the cost savings offered by high-deductible health plans (HDHP), especially when paired with an employee-friendly savings option such as a health savings account (HSA) or health reimbursement arrangement (HRA). But despite the numerous benefits, there were some limitations and challenges presented by HDHPs Hormel needed to find a solution that helped employees cover any potential personal financial burdens. Fast forward to a year and a half later, and Hormel executives are pleased to report extremely high year one results 62% enrollment in its HSA-based HDHP plans. Founded in Austin, MN, in 1891, Hormel employs nearly 20,000 employees worldwide, and manufactures a well-rounded portfolio of trusted, household products including Skippy peanut butter, Chi-Chi s salsa, Jennie-O turkey and SPAM. Hormel gives generously to charities and fosters an environment of engaged employees. How did Hormel manage such a successful transition? This case study follows Hormel through its benefits transition, including decision making, change management process, communications strategy and year one enrollment results. The HSA Decision Hormel executives recognized that pairing high deductible health plans (HDHP) with tax-advantaged savings accounts would provide the necessary cost savings and consumer-friendly solution for employees they were seeking, but which account type was better for their population - Health Reimbursement Arrangements (HRA) or Health Savings Accounts (HSA)? The benefits team rigorously evaluated both account types and determined that HSAs were the better option. With HSAs, Hormel employees would gain valuable benefits like personal account ownership, investment options, funds rollover and account portability. HSAs also offer triple tax savings: 1

2 contributions are pre-tax, withdrawals to pay for qualified health care expenses are never taxed, and interest and investment earnings are also not taxed. 1 Despite the numerous benefits of HSAs, Hormel executives were concerned that employees may potentially be exposed to financial risk. Employees new to an HSA-based HDHP may not have enough funds accumulated at the beginning of the plan year to cover health care expenses, especially in the case of unexpected health incidents. Mitigating HSA Risk with HSA On Demand Hormel executives found the answer to risk mitigation with HSA On Demand, a solution enabling employees to cover unanticipated health care expenses when the HSA balance is not sufficient at the time of service. The market-unique solution, administered solely by ConnectYourCare, enables needbased, interest-free payroll advances to employees while minimizing risk and exposure for the employer. With HSA On Demand, employees are able to access their full year s contributions at any time of year. By eliminating the up-front risk of a catastrophic financial event, this solution drives enrollment by allowing employees to opt for an HSA-based plan with confidence and peace of mind. Additionally, HSA On Demand is hassle-free for both employees and the employer. It s fully automated, requires no paperwork and provides real-time advances of future contributions right at the point of service like the pharmacy or doctor s office. Advanced funds are then repaid through future payroll deductions. After selecting HSA On Demand, Hormel set about building a strong strategic plan design and robust communications plan to ensure a smooth transition and spur adoption. Building a Smart HSA Plan Design To achieve the desired results, the new HSA-based HDHP options needed to be financially attractive to employees, framed in a positive way and their benefits clearly communicated. Hormel executives knew it was important to illustrate how the new plans compared to the existing low-deductible option. 1 Some states have additional tax rules. Refer to your state s tax guidance regarding HSA filing and taxation. This information does not constitute tax advice. For more information, please contact your tax advisor or refer to IRS Publication 969 at 2

3 In addition to a lower price point for employees, the new plans were set up to carry lower annual out-ofpocket maximums. HSA On Demand was put in place to provide the necessary safety net for new HSA adopters. Hormel started by rebranding the existing low deductible PPO as the Traditional Plan and repositioning it as the most expensive option. Then, to diminish any negative connotations when referring to a high-deductible health plan, the new HDHP options were branded with the positive title, Healthy Savings Plans. Employees electing the Healthy Savings plans could choose between a funded and a non-funded option. Both options include HSAs with HSA On Demand, but they have varying deductibles and out-of-pocket maximums. Employee costs for all plans break down as follows: Healthy Savings Plan Option 1 Single Deductible: $1,500 Family Deductible: $3,000 Hormel contribution to HSA o Single : $500 o Family: $1,000 Healthy Savings Plan Option 2 Single Deductible: $2,000 Family Deductible: $4,000 Hormel does not contribute to HSA Traditional Plan Single Deductible: $500 Family Deductible: $1,500 Out-of-Pocket Maximum $4,0O0 $8,000 $4,000 $8,000 $4,500 $9,500 With either Healthy Savings Plan choice, employees have the option to elect a limited purpose flexible spending account (LPFSA) to pay for eligible vision and dental expenses in order to save HSA funds. An existing health care FSA plan was available to employees who elected the Traditional Plan. Taking into account the broad spectrum of its employees, the timing of collective bargaining and the changing benefits landscape resulting from the Affordable Care Act (ACA), Hormel executives chose a phased-in approach for the new Healthy Savings Plans. To minimize the rollout s impact and control the noise, Hormel limited the rollout to its headquarters. This location has the heaviest concentration of employees, most of which are office hourly and salary. Beyond this test group, Hormel s workforce consists of 5,000 employees in subsidiary brands, 500 employees in its Rochelle Foods subsidiary and 4,000 collective bargaining employees in the production division. 3

4 Communications that Drive Enrollment Hormel executives knew that they needed compelling and engaging communications that explained the new Healthy Savings Plan options in simple language using recognizable, branded materials and tools. Executives set up a communications team that included representatives from Hormel s communications and graphic design departments as well as company leadership. Hormel also tapped ConnectYourCare for communication expertise. The team developed a communications plan incorporating best practices that leveraged positive framing, simplified messaging and strategic frequency. Branding. Brainstorming sessions resulted in strategies to brand communications pieces with color and a unique graphic style to create cohesion with a consistent and recognizable look. The goal was to have employees immediately recognize Hormel s benefit communication materials when they saw specific colors or fonts in their mail. Partnership with Experts. Hormel partnered with ConnectYourCare to drive engagement with a unique, Watch a Video, Win a Prize contest. The contest campaign used a QR-coded postcard encouraging employees to enroll in a random drawing to win an ipad mini by watching an educational video. The contest achieved a 65% engagement rate and provided useful measurements of success, understanding and sentiment toward the new Healthy Savings plans. ConnectYourCare also built a custom plan calculator tool, allowing employees to calculate their personalized savings projections under each plan. Additionally, ConnectYourCare built a custom benefits website, so Hormel employees could have a home base for HSA information. The site housed Hormelspecific plan design information, interactive tools like videos and calculators, helpful FAQs, and much more. Visual Presentation of Key Concepts. Messaging relied heavily on graphics to demonstrate important concepts. Complex concepts were condensed into manageable, bite-sized pieces of information. For example, 100 word post cards included message-specific URLs directing employees to the targeted topic. 4

5 Targeted Communications. Targeted communications for eligible employees were executed about every 2 3 weeks from May through Hormel s Open Enrollment in October. During that span, small bits of information were released to employees to avoid information overload, including a custom infographic chart comparing each type of account, with its related cost, using colorful graphics and clear, simple language. Results Message and Channel Frequency. Letters, post cards, door signs and posters were mixed with interactive communications including an online plan comparison calculator, mandatory in-person meetings and intranet meetings. Internal and external employee websites were set up to ensure that spouses also had access to benefit information and a comparison tool to review the new benefit costs. Hormel s benefits team anticipated a 20% adoption rate for the new Healthy Savings Plan options based on benchmarking efforts, however, Hormel tripled its goal and achieved 62% enrollment in the HSAbased HDHPs in year one, among eligible employees. This result is more than double the national average of 30% 2 according to Mercer s National Survey of Employer-Sponsored Health Plans. Another key benchmark of the program s success was employees personal buy in, measured by the level of employee contributions to their HSAs. Communications encouraged employees who chose the Healthy Savings Plan options to deposit the difference from their traditional plan costs into their HSAs, and the communications were a success. The average employee contribution to Healthy Option Plan 2 was $3,387 and $2,371 to Healthy Option Plan 1. Devenir s HSA Research Report shows that both plans beat the national average of $1,615 3 for employee contributions to HSAs. Additionally, Hormel s employees noted in survey results that HSA On Demand contributed to a true comfort level with the transition to HSAs. The following employee feedback is a further indicator of program success: Having the On Demand feature allowed us to replace our glasses at the beginning of the year instead of waiting until the end of the year. Kevin, Hormel Employee 2 Mercer s 2013 National Survey of Employer-Sponsored Health Plans Devenir HSA Research Report: Year-End HSA Market Statistics & Trends with January 2014 Supplement. 5

6 I don t know what I would have done without HSA On Demand. Imagine my surprise when I was at the pharmacy picking up my prescription refills and they told me the cost was over $500! Thank goodness for HSA On Demand. Janice, Hormel Employee Looking Ahead Hormel plans to capitalize on the great success of its Healthy Savings Plan communications. Ongoing, proactive education leveraging visual-based communications will help benefits executives expand the Healthy Savings Plan Options across Hormel s workforce. Targeted, personalized communications will enhance the already robust communications plan. About ConnectYourCare ConnectYourCare is one of the largest and most responsive providers of health care savings accounts, and award-winning solutions, our approach to consumer directed health care is rooted in creating better, more efficient connections among the people who provide benefits, the people accessing services, and the people who deliver services. Blue chip organizations across the country turn to ConnectYourCare for our highly rated customer service and best-in-class member experience, advanced educational tools for better-informed choices, acceleration of savings with ROI efficiencies and simplification of processes with brilliant customer-focused solutions. There is a unique solution for every company and we won t stop working until we connect you with the perfect one. How can we help ConnectYourCare? For more information about HSA On Demand, a unique solution that is revolutionizing the HSA world, visit 6