Industry: Wholesale Plumbing Supplier
Number of Employees: 130
Headquarters: Nashville, TN
Kenny Pipe & Supply Inc. is a family-owned, 230-employee, wholesale plumbing, pipe, and valve distributor based in Nashville, Tennessee. The company had been on a carrier-controlled, self-funded plan for several years. However, with an aging population and growing company, the health plan began to see dramatic cost increases. In 2016, the company was facing a 50% increase for employee costs if a change wasn’t made. Their three main goals were to 1) improve quality and appropriateness of care, 2) reduce costs for employees, and 3) reduce overall plan cost.
Starting in 2017, the company engaged benefits advisor David Johnson with the Alera Group. David helped Kenny Pipe & Supply transition to a risk sharing arrangement called an insurance captive. Over the next three years, David and the company implemented the following programs: 1) a reference-based-pricing model based on paying health care prices as a percentage above Medicare rates. 2) a transparent pharmaceutical benefit manager, including an independent specialty drug sourcing solution, and 3) an innovative benefit design that rewards patients who use a custom-built network of direct contracts with the local hospital systems.
The plan saved 27% on the plan’s per-member-per-month costs in the first year. The prescription drug solutions implemented in year 2 reduced pharmacy spend by 22%. Overall, the transformation of the company’s health plan has saved $750,000 over three years.
When it comes to patient cost-sharing for premiums and out-of-network benefits, the plan is a dramatic improvement over the company’s previous carrier offering. Employees enjoyed a $0 deductible and $500 max copay for certain high-value care and high-value providers. This contrasts with the previous deductible of $1,000 and a $3,000 max out-of-pocket cost for employees. With the savings from the health plan, Kenny Pipe & Supply was able to enhance its 401k match program, improve the benefits available to members, and reduce employee out-of-pocket costs.