CONTAIN HEALTH BENEFIT COSTS WITH SIMPLE COMMUNICABLE MODIFICATIONS

Challenge: Modify our health maintenance organization (HMO) plan to increase cost sharing.

Action: We looked for simple changes in our HMO plan that would keep costs from rising more than 6 percent. Our principal move was to raise average monthly contributions. For employees with single coverage, we raised these from $90 to $95. For family coverage, we raised monthly contributions from $340 to $360. To help retain employee good will, we decided to maintain the copayment for visits to a physician at $ 1 8, which was viewed positively. – Controller, transportation, 400 employees, Connecticut.

USE JIT AND OTHER MANAGEMENT PRACTICES TO LOWER INVENTORY COSTS

Challenge: Take cash out of inventory as our production falls.

Action: We integrated a JIT (iust-in-time) buying process with VMl (vendor managed inventory) to reduce our carrying costs by 50 percent. To do so, we took the top 20 items, which equal 80 percent of inventory dollars, and stocked them on site. Then, we put these stock items on consignment. The 80 percent of items that equaled 20 percent of inventory dollars were put in the JIT program. These are stored in the vendor’s facility. – Controller, manufacturing, 550 employees, North Carolina.

CUT RESEARCH EXPENSE BY RAISING HIT RATE IN OUR PRODUCT PLANNING

Challenge: Separate the wheat from the chaff earlier in our new product cycle.

Action: We have reduced the amount of time we spend on projects that never get implemented. Now, we have a much better success ratio because we do a better job of getting critical technical input and top management buy-in early in our project development cycle. We estimate that the time spent on these go-nowhere projects has dropped from 25 percent of our engineering time to maybe 1 0 percent. -Assistant controller, chemicals, 1,400 employees, Texas.

LOWER TOTAL BENEFITS COSTS WITH CHANGES IN OUR DENTAL PLAN COVERAGE

Challenge: Make small changes that deliver downside protection.

Action: Our dental plan is a popular benefit with stable costs, rising just 2 percent in the most recent year. Here, we decided to maintain the monthly employee contribution for coverage – that is, $17 for individual coverage and $50 for family. But we decided to increase our maximum annual benefit amount from $1,250 to $1,500. This preserves the strength of our coverage for routine dental visits. We continue to pay 100 percent for preventive care but require a 20 percent coinsurance payment for most restorative services. – Controller, services, 150 employees, New York.

MIX SELF-INSURANCE AND EXCESS COVERAGE TO DECREASE P&C PREMIUMS

Challenge: Develop an effective self-insurance program for P&C risks.

Action: We have taken our general liability coverage from a deductible program with third-party administration of claims to a self-insured program with self-administration. We created the functional expertise, systems, and procedures to administer our self-insured program. At the same time, we kept the ability to outsource the management of potentially serious claims to our carrier. We estimate our annual savings to be more than $1 million. -Controller, wholesale/retail, 2,500 employees, Tennessee.

NEGOTIATE FEE REDUCTION IN 401(k) PLAN BY ELIMINATING DUPLICATE PAYMENTS

Challenge: Cut 401 (k) costs without changing our pension program.

Action: Our company uses institutional mutual funds as investment options in its 401 (k) profit-sharing plan. The annual operating expenses of the funds include 1 0 to 1 5 basis points for administrative costs. In past years, the plan was also charged a flat lump sum for recordkeeping and trustee costs. Since this fee ($7,500 per year for a $24 million plan with 120 participants) is duplicated in the fund’s annual operating expenses, we were able to negotiate its elimination. – Controller, services, 700 employees, Minnesota.

TRIM INVENTORY LEVELS BY INCREASING USE OF CYCLE COUNTING PRACTICE

Challenge: Make fuller user of cycle counting.

Action: We implemented a moderately aggressive cycle count program in portions of the warehouse that we reserve for slowermoving items. In the fast-turning sections, we now conduct daily wall-to-wall inventory counts. This has made it possible for our buyers to order on JIT basis. Our control is so great that we can sell inventory in transit. Altogether, these actions reduced inventory costs by more than $20,000 per month. – Controller, distribution, 200 employees, Maryland.

REDUCE TRAINING COSTS BY ADOPTING INTRANET-BASED LEARNING MODULES

Challenge: Develop system for training hourly employees at reasonable cost.

Action: We made sure our hourly workers had access to intranet-based learning modules that are self-paced. This reduces our costs for travel, trainer salaries, and contracted trainers. There are also intangible benefits in this approach, such as the fact that the training in our modules is immediately usable on the job. Even so, there seem to be some drawbacks, with some managers not happy with the quality of staff learning. We’re sticking with this approach, however, since the cost savings may reach $25,000. – Controller, government, 250 employees, Illinois.

LOWER HEALTH BENEFIT SPENDING BY ADJUSTING COINSURANCE FOR HOSPITAL STAYS

Challenge: Boost cost-sharing for big-dollar illnesses.

Action: We adjusted our cost-sharing arrangements for in-network hospital services. After long deliberation, we decided to maintain our coinsurance charge at 20 percent of eligible charges. But then, we decided to add an overlapping set amount per hospital stay, which is $250. Meanwhile, we raised the coinsurance amount for out-of-network hospital stays from 30 percent to 35 percent of eligible charges. – Controller, hospitality, 1,000 employees, Florida.

CHANGE SALARY MIX AND BONUS STRUCTURE TO KEEP DOWN COMPENSATION COSTS

Challenge: Shift gradually to more performance-based compensation.

Action: Several years ago, we began to shift a portion of each year’s merit budget to nonbase funds. Then, we respend this money in successive years. We plan to continue the process until our nonbase funds are 50 percent the size of the base merit funds. We believe this is a tremendous strategy for rewarding annual contributions without compounding future costs. – Assistant controller, high-tech, 4,000 employees, Texas.

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This entry was posted on Saturday, August 22nd, 2009 at 4:18 pm and is filed under Dental Care & Health Care, dental insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.