Henrico-based company sells new health-care plan

JOAN TUPPONCE SPECIAL CORRESPONDENT
Published: December 22, 2008

As president of Henrico County-based Streamline Timberworks, T.J. Daly looks for ways to save his company money. This year he saved more than $50,000 -- 28 percent -- by changing the company's health insurance to nHealth.

"There are three things that are unique about nHealth," he said. "They understand more than just insurance, they take out the complexity of managing [health-care costs] from both the administrative and employee perspective, and they have one-on-one interaction."

Paul L. Kitchen and Jim Slabaugh started nHealth in January.

"I came from the policy side and Jim was the guy on the street selling to employers," Kitchen said.

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The Henrico-based health-insurance company recently was named one of 10 companies to watch by The Venture Forum, a regional venture-capital and business-networking group.

"It validates for us that our peers in the business community recognize that the nHealth model is truly innovative and unlike anything offered by traditional health-insurance providers," Kitchen said.

Kitchen, who grew up in Ginter Park, spent the previous 20 years with the Medical Society of Virginia. He left the physician-support and lobbying organization in 2007 after serving for 10 years as its executive vice president and chief executive officer.

At the Medical Society, Kitchen formed an insurance brokerage agency for members as well as a consulting group that worked with doctors. His work with the consulting group, coupled with an injury he sustained, helped him realize that doctors are the best value in health care.

"I had an a-ha moment," he said. "I ruptured my patella tendon, and I figured out what I paid my orthopedic surgeon was less than what my car mechanic got paid when I had a problem with my car."

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Kitchen wanted to design a plan that would lower a company's health-care premiums but still cover the medical services that represent the greatest risk of financial burden to individuals and families.

The consumer-driven approach gives employees more control of their care by using a Health Savings Account. The account, built from pre-tax dollars, is used to pay doctors' fees as well as the deductible portion of the covered services and other qualified expenses.

Kitchen pondered the idea of starting an insurance company for four years.

He wasn't comfortable at first about leaving his position at the Medical Society.

"You have to cut loose your financial support," he said. "But I believed it would work. It's like a parachute jump. When you jump out of a plane and you pull the ripcord, you have to believe it will work."

The concept of getting consumers involved in their own health care made perfect sense to Slabaugh, who was recruited by Kitchen in 2004.

"Paul came to me with this idea of how we could drive the costs even lower," Slabaugh said.

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Before joining Kitchen, Slabaugh co-founded Keiter, Slabaugh, Penny and Holmes, a Henrico-based employee-benefits and human-resources consulting firm. Earlier in his career he worked for Blue Cross Blue Shield and Mercer Human Resource Consulting before founding Slabaugh Group Associates, now Wachovia Insurance Services.

"The current system is not sustainable," he said. "We have to get consumers involved in their health care or we will be looking at the government trying to solve the problem for us. By joining in nHealth, we could make the cost of health insurance more affordable."

Slabaugh knew that nHealth would need an experienced claims and operational team to be successful. Kitchen contacted ACMG Inc., an Ohio company that had started six health-maintenance organizations, to discuss the process. NHealth later acquired the company.

"It was nice to have a company that had expertise in insurance-company startups," Slabaugh said.

Kitchen accumulated 70 investors, raising enough money to start the company. Before it could start doing business, it needed Bureau of Insurance approval, which came in January.

"Then we had to create marketing materials, get an actuarial finalized and get our Web site up and running before we could start selling," Slabaugh said.

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The company started its marketing campaign in September. So far it has enrolled 11 companies, each with fewer than 100 employees, the target market for nHealth in its first year.

Next year, nHealth expects to enroll employers of all sizes.

Chris Nagle, managing partner in Main Street Benefits, was eager to add nHealth to the carriers he represents as a health insurance broker.

"Their process seems to work better. They are managing the claim and the disbursement of the funds," he said. "Their plans are easy to understand."

When Daly of Streamline Timberworks was looking at the plan, one of his concerns was that his 14 employees are in Richmond, Floyd, Va., and South Carolina.

"That wasn't a problem at all," he said.

Dr. Leslie Rose III, an internal-medicine physician who has six employees, recently signed up with nHealth and saved more than one-third on his premiums.

"It's good for us," he said. "It's less expensive and covers what we need. It gives us protection from hospital bills. After the deductible, covered services are paid at 100 percent."

Kitchen believes that companies are starting to seriously look at nHealth as a viable option in the insurance market.

"People like the consumer-driven approach," he said.