Reference no: EM133181651
Benefits-Who Knew?
Human Resources Manager, Edward Dhaliwal at Frieberg Printing was not a benefits specialist, so, when the renewal proposal for their significant benefits program became due, he felt it would be wise to have it reviewed before approving it. They had an operation of 1,000 employees, about 100 in office or management jobs and everyone else in the plant. The benefit plan was similar for all. The employer covered most costs, but the premiums for long term disability (LTD) coverage was paid by the employee.
In consultation with Moira Miller, the Corporate Benefits Manager in Chicago, it was agreed that, they would engage a local benefits consulting firm to review the benefits renewal proposal to ensure it was appropriate. They had no specific concerns with their benefits provider, but it was a big plan and felt it should be scrutinized by knowledgeable people. Moira was quite well versed, but American benefit plans were different, so she was in accord with this approach.
Edward and his team met with the benefits consulting firm on the renewal. They reported that the cost increases recommended by the benefits provider were in line with industry costs and rates. When LTD costs were discussed, however Dhaliwal was shocked to hear that the premium employees would pay was double their current rate!
While the LTD premium was quite low, he was still amazed at the increase. "How can I tell the employees their benefit cost is doubling!", he exclaimed. Their Consultant replied, "You are lucky! For some companies it's triple. A few others can't even get coverage! It's stress! Stress claims are through the roof. It drives up the cost of long term disability coverage across the whole benefits industry"
This was still quite amazing to hear! Edward was glad that the LTD premium for employees was still relatively low, despite it doubling, but it certainly made him think about benefits in a different way.
Once things calmed down, the HR team departed, and Edward was able to prepare how to announce the change to employees. At the meeting, he basically laid it out as he had been told, and they understood. The benefit plan was still considered to be a good one, and they accepted the change.
Edward was not finished however, he did not want them to be one of the firms who could no longer get LTD coverage for their employees. That would be a problem. While considering this issue, he noted the benefits provider had made a number of coverage suggestions as well, so investigated the overall benefits package further.
Their level of LTD claims was not extreme, but not as low as it could be. He knew that many employers had been initiating stress management programs and finding them worthwhile. While Employee Assistance Programs (EAP) are completely confidential, the company did receive semi-annual reports on usage. No individual information was provided, but the report showed the percentage of employees who accessed the plan and the reasons, including workplace stress.
Considering their report, workplace stress was a bit elevated, but he still decided a stress management initiative was worthwhile. On the overall plan, the benefits provider had a number of other recommendations to reduce costs for both employees and the Company:
- Shift funds allocated to coverages that were less often used (chiropodists,) to other, more commonly accessed benefits (massage therapy, pharma care, etc.).
- With long term prescriptions recommend larger medication orders, resulting in fewer dispensing fees, as well as requesting generic drugs when available.
- Considering new benefit offerings, but require employees to pay higher percentages of cost.
- Offering a "flex plan" or health spending account approach, where employees could designate funds towards the benefits of their choice (which many change during their careers).
The experience with other firms was that, these changes such as these enabled the benefit pans to provide more targeted coverage at a while controlling costs.
Address the three questions below (base your answers on course material AND on your personal experiences and sensibilities about workplaces):
- Benefits are often taken for granted, yet the expense is approaching 40-50% of annual wages. Based on this case, what can you learn about how companies can scrutinize and manage their benefits plans?
- What additional benefits, beyond what traditional plans offer, would you be interested in? Why?
- What health spending account options might appeal to you at different stages of your life or career? Why?