Beating the System

The problem: Getting great health insurance for your employees while retaining your nickname, El Cheapo.

Reality check: Overdosing on episodes of Chicago Hope and ER in order to practice medicine on your employees is probably not the way to go.

The way to go: In 1997, when John Campbell started his Raleigh, North Carolina, firm, he picked up the cost of his employees' old insurance carriers. Campbell, 33, paid through COBRA, which squeezed the financial life out of him. Ironic, because Campbell Alliance Group Inc., which projects sales of $3 million to $5 million this year, is a business development consulting firm that serves healthcare information system vendors and pharmaceutical companies. But not too ironic, Campbell asserts: "Even large provider networks, health plans and hospitals struggle with the cost of providing good care for their employees."

Forget costly HMOs and PPOs, which Campbell considered briefly. Instead, he formed an alliance with Adams Keegan, which isn't a health-care provider at all but a professional employer organization (PEO) in Memphis, Tennessee. Now this is an industry that's a master at beating The System. The alliance allowed Campbell to outsource his human resources functions to Adams Keegan, effectively making the two companies "co-employers." Because Adams Keegan handles human resources for a network of companies, its buying power with health-care providers allows it to find the best coverage at the best price.

Campbell didn't let the co-employer term scare him--after all, he's only sharing the part of his business he doesn't want. Adams Keegan takes care of the health insurance headaches, 401K, workers' compensation insurance and other paper-heavy tasks.

According to Bob Adams, president and CEO of Adams Keegan, PEOs generally charge fees of 1 to
4 percent of a company's payroll. Even taking the cost of the PEO into consideration, Campbell estimates he'll save $20,000 a year in health insurance costs alone. "It lets me sleep a little better at night," Campbell says. But if it didn't, his health care would likely treat that, too.

Bottom-line advice: "Benefits aren't the primary reason employees choose an employer," says Campbell, "but they're often a differentiating [factor]."The moral of the story: Your staff's collective talents will be low if you tell interviewees: "Health benefits? Sure, we provide free cough drops in the receptionist area."

This article was originally published in the May 1999 print edition of Entrepreneur with the headline: Beating the System.