At The Kraft Heinz Company, It’s All About Choice

When the Kraft Foods Group merged with H.J. Heinz Co. in 2015, it was up to Kathi Barton to implement a benefits program that honored the legacy of both companies

Like many legendary companies, Kraft earned its initial fame from a single product—in this case, a processed cheese so revolutionary that company founder J.L. Kraft obtained a patent for it in the early 1900s.

Much changed over the past century, with Kraft eventually producing everything from cream cheese to frozen pizzas. Even more evolution occurred in July 2015, when Kraft Foods Group merged with H.J. Heinz Co. to form The Kraft Heinz Company. Suddenly, Kraft Macaroni & Cheese, Heinz Ketchup, Oscar Mayer hot dogs, PHILADELPHIA cream cheese, and other iconic brands and products found themselves under the same corporate umbrella.

The benefits department at Kraft Heinz has had a similarly expansive trajectory, thanks to leaders over the years like Kathi Barton. Barton began her career at Kraft Foods in May 1998 as a benefits manager. Today, she serves as Kraft Heinz’s head of benefits, which means she was in charge of heading a brand-new benefits program during the merger—one that drew from the existing benefits packages at both companies. Considering Kraft Heinz has about twenty thousand employees and about thirty thousand retirees in the United States, it was a hefty undertaking, to say the least.

Kathi Barton, The Kraft Heinz Company

For Kraft Foods Group’s part, the pre-merger benefits package included a single high-deductible healthcare plan accompanied by a health savings account (HSA) and an integrated wellness program through one consolidated insurance carrier. Moving to one high-deductible health plan was the first important component of the strategy to put the buying power in the hands of the consumer.

Traditionally, healthcare has not created a true marketplace environment—meaning the party paying for the care (historically, the company) was not the individual utilizing care (the employee). A traditional plan with low deductibles and low copays has the potential to encourage the wrong healthcare decision-making. When employees only pay $10 for a high-cost prescription or procedure, they’re not incentivized to make different decisions (for example, request a generic drug or a lower-cost procedure). These types of decisions benefit both employee and employer through better use of healthcare funds—an issue not always addressed in the traditional model and one of the root causes of skyrocketing healthcare costs.

The second important component of the strategy was the health savings account feature.

“Eligible employees could build up these accounts through their own tax-free contributions, and through Kraft’s matching contributions and contributions employees earned by participating in wellness activities,” Barton says. HSAs allowed employees eligible for this benefit to have control around how their healthcare money is spent, instead of just paying higher monthly premiums for lower deductible plans.

“We felt the only way for them to do that was to have skin in the game,” Barton says. “If employees see these accounts as their own money, they will make different decisions about how that money is spent. But we also provided a transparency tool so employees could really shop around for healthcare—so they could use the tool to make educated healthcare purchasing decisions.”

The final part of Kraft Foods Group’s three-pronged approach to healthcare was a comprehensive—and mandatory—well-being program, which included valuable tips, information, and initiatives related to a healthier diet and overall lifestyle. The well-being program had more than a 98 percent participation rate.

“There were pretty significant surcharges applied if employees chose not to participate,” Barton says, but explains that the initiative was meant to assist everyone in gaining valuable information about their health status and taking small steps to understand and improve their health. If they took those small steps, they could not only avoid the surcharges, but earn significant money that was deposited into their HSAs.

“If employees see these accounts as their own money, they will make different decisions about how that money is spent.”

“We felt like we needed to engage employees,” she says. Of course, everything shifted once the Kraft Heinz merger was under way.

Heinz had introduced a group marketplace strategy to its employees in 2015, with multiple plan and insurance carrier options. When initially presented with the higher number of options available from Heinz’s pre-merger benefits program—many of which had a much higher deductible than Kraft’s one plan, Barton was concerned.

“Heinz also had a well-being component in its plan,” she recalls. “However, it was completely voluntary, meaning the only surcharge pertained to tobacco use and people could elect to participate in any of the other well-being initiatives to earn incentives for HSA deposit. The strategy Kraft had before the merger was that you had to participate or you paid a lot more money for your premium.”

Barton says that normally the strategic planning and implementation of a new benefits program could take more than a year. But after the formation of Kraft Heinz it needed to happen much faster, meaning that she and her benefits team needed to make swift yet effective decisions when it came to what kind of healthcare would be offered.

The team knew it needed to be all about choice.

Ultimately, the decision was made to move to the group marketplace to allow employees to choose from multiple plans and carriers and to adopt Heinz’s approach to voluntary wellness participation as well as to take advantage of the improved marketplace pricing. And the newly formed company retained Kraft’s practice of guiding employees through the benefits process and providing HSA matching contributions, in addition to a strong emphasis on educating employees about the value of the HSAs.

When all was said and done, Barton was happy to discover that employees weren’t overwhelmed by all of the new options at their fingertips. In fact, it was quite the opposite.

“What I’ve learned is that employees love choice,” she says. “We had phenomenal feedback when we implemented the group marketplace. We were still able to implement matching contributions to HSAs and employees are participating in wellness and earning HSA contributions. And on top of all that, we’ve been able to control costs.”

Best of all, a high percentage of employees are participating in the wellness program, despite it now being voluntary. Barton believes that this kind of lifestyle change is what will truly lead to a healthier country.

Historically, healthcare has put the ambulance at the bottom of the cliff, when what we actually need to do is put up a guard rail,” she says of the importance of preventive rather than reactive decision-making. “We’re making strides in so many ways. You see it with the younger population. They’re much more focused on exercise and eating right. I hope we eventually don’t have to provide well-being incentives at all, and that it’s just a way of life.”