February 2007 - Back to Table of Contents
Pulse
Grain Exchange
A Minneapolis company takes an innovative approach to funding health care for its farmer customers.
For farmers such as Gary Eden, a bushel of corn may be worth a pound of cure.
Eden, who raises corn and soybeans near Iowa City, had been watching his health insurance premiums rise between 10 and 15 percent a year—bringing his monthly payment to nearly $1,000 on a policy that had a $1,500 deductible. “I was concerned because, although it’s just my wife and I, our costs continually rose,” he says.
Eden found some relief last year when he enrolled in a program offered by Minneapolis-based Cargill AgHorizons in which the company helps set up and fund health savings accounts (HSAs) for farmers in exchange for a commitment of grain.
The idea for the program, called Harvest Health, came from a series of conversations between Cargill AgHorizons representatives and their customers, the farmers who provide the company with raw materials. One of the issues that arose during those conversations was the high cost of health insurance.
Because most farmers are self-employed, they have to find—and fund—health insurance for themselves, their families, and, in some cases, their employees. With the high cost of coverage, spouses often take jobs off the farm just for the health care benefits, according to Mark Tracy, assistant vice president of risk management for Cargill.
Around the time the discussions with farmers were taking place, President Bush signed the Medicare Prescription Drug, Improvement, and Modernization Act, a 2003 law that included a provision that allowed working individuals to place pretax dollars in savings accounts to use for health care expenditures. Health savings accounts, coupled with high-deductible health insurance policies, eventually became the cornerstone of “consumer-directed health care” and have been marketed as a vehicle for holding down the cost of health insurance premiums.
“We thought the solution would make a lot of sense to farmers,” Tracy says.
An Idea Takes Root
What sets Harvest Health apart from other consumer-directed approaches is that Cargill will place money in the accounts of its farmer customers in exchange for a commitment of grain. (In many other industries, only employers and employees can contribute to the accounts.) “In farming, cash flow only occurs around harvest time,” Tracy says. “We set it up so whenever a farmer wants to commit us part of their production—corn, soybeans, wheat, whatever crop they raise—at the time of that commitment, we will deposit funds directly into their HSA.” He adds that the money is in addition to what the farmer is actually paid for the grain.
Here’s how the program works: If a farmer decides in March to sell 10,000 bushels of grain to Cargill for harvest delivery at a maximum price of $5 per bushel, Cargill would deposit $1,000 in the farmer’s HSA within five days. Tracy says the farmer can use the money in the account immediately after they’ve made that commitment.
Cargill can contribute up to the maximum amount allowed by the government into farmers’ accounts. Farmers also can deposit their own money into the account. The accounts are administered by Wells Fargo, and the farmers pay a small monthly administration fee.
Tracy says Cargill began giving presentations about Harvest Health to farmers in January of 2006. Since then, the program has been slowly catching on. More than 100 farmers have enrolled so far. Tracy says most have between $1,000 and $3,000 in their accounts.
“It’s a complex program,” he explains, noting that it has required Cargill to spend a lot of time educating farmers about the concept. He says farmers also need to switch to an insurance policy that qualifies for an HSA in order to participate.
Tracy says they surveyed farmers before setting up Harvest Health and discovered that 65 percent had low-deductible plans and 35 percent had plans with high deductibles. He expects to see that trend reverse itself in the next five to 10 years.
Growing Enthusiasm
Since its introduction, Harvest Health has garnered attention from lawmakers and health care policy experts. Representatives from Cargill have been invited to the White House to talk about the program. The company also is working with American Family Insurance, which plans to market Harvest Health to its farmer customers.
“There have been a lot of inquiries from all kinds of places we didn’t expect,” Tracy says, including a fair amount from other Cargill businesses. He says that representatives from Cargill’s cocoa and chocolate business are considering a similar program for bakeries and confectioners with 10 to 15 employees.
Although he doesn’t have employees to insure, Gary Eden enrolled in the program last spring and says he plans to continue with it. He was able to switch to a health insurance policy with a $5,000 deductible and now pays about $500 a month in premiums—half of what he had been paying.
Eden says last year Cargill put about $4,000 in his HSA. In addition to paying less per month for health coverage, he likes the fact that he can use the money in his account to pay for over-the-counter drugs and eyeglasses—items his previous plan didn’t cover—and that the money stays in his account even if he doesn’t use it all by the end of the year.
“That money is mine to keep,” he says. “It’s not subject to any other stipulations.”
—Kim Kiser