Garlic Jim’s Famous Gourmet Pizza, an Everett-based restaurant franchiser,
faced a question afflicting most small businesses nowadays: how to pay for
employee health insurance as premiums shoot up every year.
The pizza chain found its answer in another small business, a company called
LyfeBank, based in La Conner.
Today, Garlic Jim’s no longer buys group health coverage for its headquarters
employees. But with the help of LyfeBank, the firm can afford to give workers
some money to buy insurance or pay cash for medical services.
LyfeBank, said Garlic Jim’s Chief Information Officer Alexis Nepomuceno, “is
great for small businesses — or any business.”
LyfeBank gives businesses a way to help out their workers with health
insurance or expenses as these companies struggle to afford the ever-mounting
cost of employee coverage.
The approach also fits with the argument made by some experts that the best way to control health
costs is to put money directly in the hands of consumers, prodding providers to compete with lower
prices and better quality.
Until a year and a half ago, Garlic Jim’s had been sponsoring group health insurance sold by
Premera Blue Cross. Then came a 40 percent renewal rate increase.
“We couldn’t afford such a dramatic increase,” Nepomuceno said. “Something needed to give.”
A mutual friend introduced him to Randy Ray, founder and CEO of LyfeBank’s parent company,
LyfeSystems Inc.
Nepomuceno said Ray showed him a different way of looking at health insurance. Garlic Jim’s
signed up with LyfeBank last November.
LyfeBank enables employers to contribute pre-tax dollars to employee trust accounts at Wells Fargo
Bank.
If people work part-time for several employers, each business can contribute to their accounts.
Working families can ask their employers to contribute to their pooled accounts.
Workers draw on their accounts to buy health insurance, to pay for deductibles or co-pays, and for
vision, dental and prescription-drug expenses. The money belongs to them, and they can use it to
buy medical care in any way they wish.
Garlic Jim’s now contributes $300 to $800 a month to its 11 Everett employees, depending on their
positions. The company decides what it can afford to give, thereby making its health-care expenses
controllable and predictable.
“It give us peace of mind,” Nepomuceno said. “We’re helping our employees out, and it’s up to them
now.
The plan covers the corporate office, he added. It’s also an option offered to Garlic Jim’s franchisees
in Washington state. For example, a Redmond franchisee uses LyfeBank for its staff.
LyfeBank’s Ray declines to say how many businesses use LyfeBank, which signed its first client last
fall. But the 17-employee company now operates in seven states, including Washington, Oregon,
California, Alaska, Utah, Pennsylvania and Virginia, and also in Washington, D.C.
The company boasts clients in such business sectors as restaurants, shipbuilding, aviation
manufacturing, agriculture, construction and printing. Ray said employee contributions typically
range from about $85 a month to about $350, but some are as high as $1,200.
LyfeBank charges a sign-up fee of $25 and a monthly fee of $10 per employee.
In December, LyfeBank will offer employees use of a LyfeVault Visa debit card to pay for insurance
and medical expenses.
Ray noted that federal and state governments, too, could contribute to employee accounts as a way
to subsidize low-income workers.
According to a recent Wall Street Journal column by Democratic Louisiana Sen. Mary Landrieu, the
percentage of small companies that offer health coverage has shrunk to 38 percent from 61 percent
in 1993.
“Small businesses want to provide health coverage to their workers,” Landrieu wrote, “but when
faced with cutting employees or cutting insurance, the insurance is the first to go.”
The year 1993, when Congress last considered sweeping national health-insurance reform, was when
LyfeBank’s Ray got interested in the problem of how to help out part-time and seasonal workers,
who lacked coverage even as their employers sponsored insurance for full-time workers. Ray was,
and is, CEO of Aequus Corp., a state and national political lobbying firm on Mercer Island, and
many of his clients employed part-time or seasonal workers.
Ray posed this question: Can more than one employer pay for medical benefits or expenses for
individuals and their families?
The answer he got from lawyers: Yes, if employers decide how much to contribute but employees
decide what to spend it on.
Ray said LyfeBank works this way: Each month, employers send in a data form specifying the
amount contributed to each employee. Employers transfer the total amount for their employees in a
lump sum to a zero-balance account, and LyfeBank sweeps the accounts electronically and deposits
the money into employee trust accounts at Wells Fargo.
Nordic Tugs, a luxury-yacht builder in Burlington, contributes $300 a month to accounts held by its
60 employees.
David Goehring, Nordic Tugs’ chief financial officer, said the company employed 175 before the
recession hit and had been partly self-insured. With fewer employees, self-insurance no longer
pencils out, and group health insurance is way too expensive.
Hence, LyfeBank. “We need certainty and control of our costs,” Goehring said.
Ray said LyfeBank works well for businesses with part-time employees. He recently signed up
Pavement Surface Control, in the Tri-Cities, which has 25 full-time and 150 seasonal workers.
“They had searched for five years trying to get a group (insurance) plan,” Ray said. “But seasonal
employees are not allowed in group plans; every carrier turned them down. Now all 175 have a
LyfeBank account and an average of $2 to $3 an hour to be used on health care.”
Ray founded LyfeSystems in 2007. Besides LyfeBank, the company runs an insurance brokerage,
Aklins Insurance Services LLC, which helps employees of client firms find health insurance if they
want it.
Ray started the company with his own money and also attracted some angel investors.
“Then a funny thing happened,” he said. “We would offer the product to an employer, they would
take it, and then ask whether they could invest, too.”
