STAND-ALONE PROJECT
QUESTION
Your Stand-Alone Project responses should be both grammatically and mechanically correct, and formatted in the same fashion as the project itself. If there is a Part A, your response should identify a Part A, etc. In addition, you must appropriately cite all resources used in your response and document in a bibliography using APA style.
In preparation for your work on the Stand-Alone Project, we will begin with some background material on the consulting company that you represent and the client company that you will be serving.
The Consulting Company. In this project you serve as an Employee Benefits Consultant for the Human Resources Group (HRG). HRG is a national consulting company with proven expertise in the areas of Human Resource Management. The firm is divided into three specialty practices: Organizational Development, Employee Benefits, and Compensation. You are the lead consultant in the Employee benefits practice with several analysts working for you. Your practice involves both on-site client evaluations and internal research designed to develop and deliver benefit solutions
The Client Company. Apex Manufacturing is an Atlanta based diversified manufacturing company. It is a $2 billion organization that has been in business for 15 years. It is publicly traded on the New York Stock Exchange. Its operating companies are very decentralized and have little connection with one another. Each operating company has its own HR department headed by a VP of human resources and a support staff. The Apex Corporate HR group coordinates all human resource activity throughout the company and is headed by an SVP of HR. There is no senior level Employee Benefits officer at either the corporate or operating unit level. The company has a total employee population of 15,000 spread over 12 states. Most of the operating unit personnel are blue-collar workers, high school educated, and earning in the $15,000-$25,000 range. There is a small executive and management group at each business unit.
The Scenario. The last several years have been rough for Apex. As the economy has worsened, its profitability has suffered. Its competitors have developed manufacturing plants in Mexico where labor costs are low, and this has translated into lower product prices than Apex can afford to match. As a result, they have seen erosion in their book of business and a steady decrease in their stock price. The Board of Directors has expressed its concern and has admonished Apex to keep a close watch on all expenses.
Apex has always been protective of its employees. It has tried to keep wages competitive and be responsive to the employees’ needs. The company has a history of paying 100% of the cost of health benefits. Apex values the relationship that it maintains with its employees and sees that relationship as a factor in its ability to hire and retain good workers. However, employee benefit costs have skyrocketed with costs for the fully insured medical plan exceeding 45% of payroll. Premiums have increased over 15% for each of the last several years and show no signs of weakening. The President of Apex is concerned that he can no longer afford to offer cost-free benefits and is thinking of introducing employee premiums. This issue has become common knowledge among the workers who have stated their refusal to begin paying premiums.
There is no champion for employee benefits at Apex and, therefore, there has been no strategic planning in this area. The rapidly spiraling cost of benefits is of major concern to the president. He knows that if he does not find a way to control these costs, the Board of Directors may force him to cut the benefit program significantly. This will create dissention among the employees, destroy their motivation, and further add to the operating problems at Apex. The president does not believe that he should have to call in outside consultants since he has a large internal HR group. Thus he looks to the senior vice president of HR for solutions. The SVP has no current experience in handling
benefit issues of this magnitude. The Benefits Manager at Corporate is a good administrator, but also not qualified to work through these issues. The SVP has used the services of HRG in the past and knows that outsourcing is the only way to address these issues effectively.
The Consulting Project. The SVP has contacted you at HRG asking for your assistance. He has gotten the president to agree to a meeting with you, although the president is still very leery of using outside help. He will have to be convinced that the expenditure for your services is justified. The meeting lasts for forty-five minutes, and the SVP has given you every chance to explain how you might be of service. (A 13-page, double-spaced, response is required.)
Part A The first phase of your consulting assignment is to respond to the president with a detailed answer to each of his three questions.
1. Why are health care costs rising so rapidly?
2. What can Apex do to control costs?
3. What guarantee of success is HRG willing to make to Apex?
Use material from the text and outside readings to help you formulate your responses. You may want to search the Internet for additional background information and statistics on the rising cost of health care. Use APA style when citing sources. Be particularly careful when considering the third question. Your response may well determine whether you get the business, but the overriding question is whether you can ethically guarantee results. Try to be creative as you come up with ways that both HRG and Apex can come out winners in this project.
Congratulations! Your responses to the President of Apex have helped him to understand the complexity of health care issues in America. He now sees that it is very difficult for any single employer to combat effectively the systemic causes of rising health care costs. He also realizes the inability of his internal staff to address the problems and, therefore, reluctantly agrees to the project.
Part B For the second phase of the project, two of your analysts came on-site to conduct the medical plan audit. After a series of meetings with Apex staff and a review of their plan documents, your analysts found the following about the Apex medical report.
Medical Plan
1. A fully insured indemnity plan is included.
2. There is a $200 deductible per family member.
3. The coinsurance plan includes paying 90% and the employee paying 10%.
4. The out-of-pocket maximum is $2000 per family member.
5. The prescription drug plan includes a $5 co-pay for generic drugs and a $10 co-pay for brand name drugs.
6. The company pays 100% of the premium for both the employee and their dependents.
You have had time to review the Apex health plan audit results. Your initial assessment is that it is a very rich plan that puts the entire burden of cost on the company. Although it does make them unique in their industry and will attract workers, it is not an approach that can continue to be cost justified. The material in your text, as well as the Lecture and Research Updates and the Required Readings, will help you in this evaluation. You should use Internet resources to research how other companies have responded to these kinds of challenges. The next step in the project is to provide an analysis of each of the plan components listed above. For each one, you are to evaluate the advantages and disadvantages of the current provision and suggest alternatives. Again, remember to cite all sources used. As you prepare your response, you should consider the following. (2-page, double-spaced, response is required.)
1. Self-Insured v. Fully Insured Plan: Would it be in the best interest of Apex to self-insure its plans, using stop loss coverage to limit their liability?
2. Introduction of Managed Care: Are there other forms of a health plan that would be more appropriate for a company the size of Apex? Consider the use of Managed Care programs.
3. Handling of Deductibles, Coinsurance, and Out-pf-Pocket Maximums: How could Apex use utilization review and case management techniques to isolate high cost areas of the plan?
4. Restructure of the Drug Plan: Prescription drug costs are responsible for a major part of spiraling health care costs. How might you change the co-pay structure to try to reduce costs?
5. Introduction of Employee Premiums: What changes would you suggest to restructure the deductibles, co-insurance, and out-of-pocket maximums?
6. Formal Recommendation: It is said that employees will never become prudent users of health care if they don’t have “any skin in the game.” How might you adjust health care premiums at Apex?
Once you have finished your evaluation, you should conclude with a formal recommendation to Apex senior management.
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