Franchise Insurance: New Sources of Value
• The corporate arm of the company needed to participate and had to be headquartered in the state of Michigan.
• It must be the only plan offered by corporate to its franchisees.
• If the franchisees come on board with the plan, it must be the only one offered to employees.
Perhaps the biggest sticking point was the franchise organization's ability to reach critical mass for participation, which was between 500 and 600 employees. Gerhardt was pleasantly surprised by the response he received from owners. "We negotiated a price that BCBS would lock in if we could get a substantial number to participate. We got roughly a third of owners on the initial rollout."
The plan, which went into effect on January 1, has been roundly applauded by Allegra participants. The package offers three preferred provider organization (PPO) choices. Members aren't discriminated against insurance-wise because of age and sex, and there's no exclusionary stipulation regarding pre-existing conditions.
Savings and benefits advantages vary from state to state. Some companies joined just to be a part of a greater participatory group and, hopefully, to avoid crippling future increases. But a Pennsylvania facility saw a savings of $30,000 for 2009, a major boon for a shop that posts $1.5 million in sales. And a New Jersey plant welcomed the change after seeing its rates balloon an astonishing 51 percent.
For some shops, joining the BCBS Michigan fold wasn't feasible. "We found a couple of states where the rates just weren't competitive at all," Gerhardt notes.
Outside of facilitating the policy, Allegra Network's corporate structure has virtually nothing to do with the insurance, outside of endorsing the plan. The plans are not billed through Allegra corporate; individual contracts are drawn up between each facility's owner and BCBS.