Reducing Health-Care Costs

1. How should Polson communicate its new health-benefits plan to employees? Communication of the new plan is critical if employees are to accept and commit to a managed health-care plan. Employees must understand the strong financial incentives that are present for staying in the network rather than using the traditional indemnity side of the plan. At the same time, details of the new plan must be communicated in such a way that it is clear to employees that Polson is committed to a strong health care program and cares about them as individuals. The approach used by “Polson” began with a task force formed by HR executives at their corporate office in Morristown, NJ. They were given the challenge to build a custom design program that would hold down health-care premium costs to a reasonable level. In March 2009, Polson signed a three-year agreement with Whitefish Corporation for a managed-care program called “The Health Care Connection.”

This plan covers medical, dental, vision, and hearing care, as well as prescription medications. It also includes a well-care program, which covers annual physical exams and prenatal care. Whitefish Corporation also guarantees annual premium increases of less than 10 percent during each of the three contract years on the managed-care side of the program. As noted in the text, it is important that benefits be communicated to employees so that they are aware of them and understand them, but in such a way that employees trust the information they receive and are convinced of the value of the benefits package (Cascio, 2013, p. 496).

This may be achieved by focusing on providing employees with benefits information they need, when they need it (e.g., through interactive computer programs or the intranet). Such systems use computers (decision support systems), telephone hotlines, and/or interactive videos to provide the information that employees need in the timeliest manner.

2. What results in terms of cost reduction do you anticipate Polson will achieve through the implementation of its new health-care program? We all know from the case information that for all employees who choose to stay within the insurer’s network, the company is guaranteed by Whitefish Corporation an annual premium increase in health care premiums of less than 10 percent during each of the three contract years on the managed-care side of the program. So the real issue becomes estimating what percentage of employees are likely to stay within the network of managed care rather than using the traditional indemnity side of the program. As a result, the savings achieved by Polson included: a) the annual premium increases were indeed held to less than 10 percent, b) $30 copayment per office visit, c) $25 per prescription (generic drug), and d) 35 percent of the cost of a brand-name drug.

3. What additional follow-up should the benefits-administration people at Polson take now that the program has been in effect for several years? It would be a good idea to check in with employees after a few years of experience with the program to find out what they like and dislike about the new managed health-care system. In fact, Polson intends to do that sometime in the future through utilization studies. In such a survey, it would be important to check the level of understanding that employees have of the new system and the degree to which they are dedicated to staying within the network and using the managed care portion, as opposed to moving to the indemnity side of the program.

It will also be important to determine if employees understand the benefits information of the new plan have been communicated effectively, if they feel that they are valued as members of the organization, and if they feel that Polson is committed to a strong health care maintenance program. 4. To what extent do you believe health-care plans such as those at Polson are thewave of the future for health-benefits plans in major American corporations? Polson was a pioneer in terms of having a national managed care network in place, but many other companies, such as IBM, have moved rapidly in that direction. Since 1991, membership in the Managed Health Care included 150 of the Fortune 500 companies.

Many companies have moved away from traditional fee-for-service health plans (most expensive kind of health insurance around) and into managed care programs. Unions seem to be supportive of this movement because they are interested in helping management find alternative high quality medical delivery systems that will have the effect of holding down their members’ increasing annual contributions which sky-rocketed under traditional fee-for-service plans.

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