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Health Care Implementation considerations excerpt:

SUMMARY

The purpose of this report is to set forth the findings of Johnson Capital Strategies, “JCS,” regarding the Health Care Benefits offered at the Hovey and Beard Company (the “Company”). The Hovey and Beard Company was selected for analysis because it presents two key issues for consideration by the HR practitioner: the need for a strategic alignment of HR with Business Operations, and the need for a Health Care assessment. The report findings are based on our review of the Company documents, 5 year trends data, an organizational climate survey,’ interviews of Company personnel, field bulletins and guidance from the Department of Labor, insights from subject matter experts, and relevant subject matter

research. It is our judgment that the company’s Health Care management system is under performing and resulting in higher cost and decreasing competitive value to the company and the plan participants. Further, the effectiveness of the HR, Human Resources department has been hampered by a lack of involvement.

1. The Company is a medium sized highly mechanistic organization with 2,000 employees producing commercial paint products for a variety of industries (597). Decisions have been centralized at the top management level and a “one best” way approach to decision making has been employed.

Management adopts the first satisfiable decision (selection of the first alternative that meets minimum requirements), an initial cost comparability was the basis for the selection of the current traditional copay health benefit plan. Producing a lack of connectivity with the goals of the company and the health coverage needs of the employees.

Questionnaire objectives 82 item instrument that yields sub dimension scores, derived from a multiple choice format.

Taylorism- Frederick Taylor named the father of the “Scientific Management” – Job redesign “one best” way to do the job do a study first.. Stressed the non-human aspects of the job.

2. The company’s emphasis on short term cost containment and the lack of involvement of the core group and, the Human Resources department directly responsible for the implementation and administration of Health Care Benefits; points to the larger problem of sub-group conflict associated with the “dual core model” of organization.  The burden and rationale for any Health Care Plan modifications should be uniformly shared and at least supported by Upper Management, Sub-committee Members, Human Resources Department, and Benefits Managers. Past performance suggest that gaining collaboration among these groups will be a difficult task. Without the buy-in and support of the HR Department, the communication with and the education of plan participants in the past has been minimal. The demographics of the company continue to shift toward increasing numbers of ethnic and minority employees it only adds to the need for greater communication.3. Prompted by continued and projected increases in health care cost, the company is now seeking alternatives to decrease cost and improve strategic business alignment. “As long as health benefit costs continue to increase, employers will seek ways to reduce these costs,” agrees Paul Fronstin, a senior research associate at the Employee Benefit Research Institute, based in Washington. For the HR practitioner it is a matter of determining where cost containment is needed and where is it most likelyto be successful within the organization?

LITERATURE REVIEW

While preparing this proposal I discovered a wealth of resources available to address most of the concerns presented in this document. The most valuable resource was the web site of the Society For Human Resource Management located at http://www.shrm.org . Has a member of SHRM, I had access to relevant articles, white papers and subject matter expertise who helped me formulate many of the concepts developed in this document.

Dual-Core model -organizational goals comes from the top down, change goods and services comes form the bottom upward.

Organizational Change (627)

Of particular benefit was an article fi-om SHRM, HR Magazine April 2004, “Assessing the Health Savings Option,” by Jay Green. This article focused on the assessment process for HR departments in determining how HSA, Health Savings Accounts can be added with existing plans. The article pointed out some unanswered questions in terms of the details of how the FSAs, Flexible Spending Accounts would work alongside HSAs. Further, the article touched on the possible shortcomings of HSAs in terms of adverse selection due to the appeal of HSAs to the young and the Healthy.

In the same issue SHRM, HR Malrazine April 2004, “Unequal Health Care” a question of demographics and cultural impact on health care utilization and prevention was discussed in an article by Allison Stein Wellner, freelance writer based in New York City. With ever increasing changes in the demographics of the workforce, HR departments need to address the disparity in care received by members of different ethnic groups. The potential impact of hidden undetected health risk can adversely affect the plan and add costly procedures and premium spikes.

In response to my research question to the SHRM forum, about health care design issues, I was directed to http://www.kff.com/insurance/ehbs2003-abstractct is the web site of Kaiser Family Foundation: 2003 Employer Health Benefits Survey. The survey is a comprehensive study of small to jumbo size Employer-Sponsored Health Benefits covering 7 years of trend data from 1996 to 2003. The information is categorized, for example, by region, firm size, industry, average wage, importance of plan features, and shown on user friendly charts for ease of comparison. I used much of this data to complete the frameworkof my case study of the Company.

The Kiplinger Letter, Vol. 81, Issue 14, Apr 2, 2004 “You CAN do more to cut health costs, though it’s not easy.” There are no cure-alls. But firms that adopt innovative strategies will see health bills rise “just” 7% this year, on average, vs. an overall hike of about 12%. This article covers an assortment of cost saving measures, notably turning employees into customers of health care services by educating them and establishing cost incentives for appropriate care selection.

“Offer incentives for physicians and hospitals, rewarding them for the most cost-effective care. Anthem Blue Cross and Blue Shield, in Ohio and Indiana, pays more to doctors who have good track records.”

Give workers more choices. Basic benefits the norm, upgrade if they pay the additional cost. Humana’s Smartsuite lets workers choose their deductibles and co-payments.

Manage drug costs aggressively. Some companies double co pays or make employees pay a percentage of the price … typically 20% to 30%.

Emphasize disease management, focusing on the 20% of workers who account for 80% of hcalth care costs.

Incentives can encourage those with chronic problems to sign up for close monitoring to get healthier.

Medical Mutual of Ohio gives free supplies to workers with diabetes.

Urge employees to fill out risk questionnaires to spot problems before they become serious. At Gillette, anyone who fills out such forms is given cash. Procter & Gamble offers lower premiums for nonsmokers, and women who take prenatal classes get free baby monitors and car seats.

Study your claims data. Firms such as Ingenix and Medstat analyze payments to identify common problems and high-risk locations so trouble spots can be addressed. The practice doesn’t violate privacy as long as the data are aggregated and individuals are not identified.

The article also supports the use of HSAs to lower over all coverage cost for both the employer and the employee.

From the PR Newswire via NewsEdae Corporation: Washington, March 19,2004 “Engaging Workers in Health Benefit Decisions Appears to Yield Significant Cost Savings.” According to the 9th annual National Business Group on Health Watson Wyatt health cost study. Companies can expect a median 7% increase in health care cost. This is considerably lower than the anticipated 12% to 13% increase projected by employers. “Employers are beginning to recognize there’s a new reality that requires new choices,” said Helen Darling, president of the National Business Group on Health. Employers musthelp employees become educated consumers.

HR CONSIDERATIONS

The best course of action would be the utilization of a normative decision model to achieve high quality decisions regarding the future of the Company. Vroom and Yetton suggest the use of a decision tree format to work through the flow of potential alternatives to arrive at the most effective appro ach.

The “Vroom-Yetton model” can be applied to each of the situations outlined in the former section. Current Management capabilities would warrant the use of outside consultants with expertise in Health Care Assessment, and Vendor Selection. Johnson Capital Strategies is happy to provide advisory services inconnection with the Health Care feasibility and cost saving study.

4VroomV,. H., & Jargo, A. G. (1978). On the validity of the Vroom-Yetton model of leadership. Journal of Applied Psychology, 67, 532-537. (Taken from Notes. of Work Sited).

Johnson Capital Strategies will establish a task force to review and formulate options for addressing the critical strategic and health benefits challenges facing the Company.