But Ross is quick to point out one thing: "This is by no means a beefed-up benefits plan, and it hasn't been sold as that. What we're selling is the fact that, where once we had one plan, we now have 400 -- one for each employee. These employees have freedom -- new options, new flexibility -- and that's the big selling point."
It is such a selling point, in fact, that some companies are using it to ease an increasingly imperative move away from the first-dollar medical coverage they once provided. It's amazing, says Hewitt partner Dale Gifford, "what changes and cut backs people will accept when they are given the ability to make some of their own choices at the same time. The mere fact of the flexibility is viewed more positively by employees than any given benefit they might receive." Clairson had already imposed measures to discourage the overuse of insurance benefits before the flexible-benefits plan went into effect, he says, but other companies are finding flexibility and cost-containment can go hand in hand. One such company is Quill Corp., an $80-million mail-order distributor of office supplies and equipment located just down the road from Hewitt's Lincolnshire headquarters.
"We had been experiencing premium increases of 40% and 50% a year in our group-benefits medical plan. That's what woke us up and got us to thinking about going flex," says treasurer Arnold Miller, one of three brothers who control the company.
"We had to find a way to make our employees think of their benefits dollars as their money they were spending," agrees president Jack Miller, "because nobody gave a damn about medical costs as long as it was our money."
The Millers decided to phase in a flexible-benefits plan built around the Hewitt reimbursement account, but with a new twist or two. They decided to replace their old group-medical policy with a new one that, unlike Clairson's, would be provided free to its 500 employees, as part of a core package or "Shield of Benefits" that also includes sick pay, life insurance, and short- and long-term disability coverage. That medical policy, however, was to be a modified, self-insured version of its former self. A 12-member employee committee was appointed to fashion the coverage.
"Everybody was a little leery at first," recalls Grace Finedore, an order-entry operator who served on the committee. "We thought they were going to shaft us, until we realized these changes were to help us -- to educate us to use benefits more constructively. But we had a knock-down, drag-out [fight] or two [about it within the committee] before then."
In July of 1982, at the committee's recommendation, the company initiated several hard-nosed changes: Claims for in-patient care would be paid at 80% instead of 100%, but outpatient expenses, usually less costly, would still warrant the full coverage. Those who didn't seek second opinions (which are also covered) before undergoing surgery would be penalized with lower insurance payments. And a $200 deductible would be established for individual medical coverage, while the deductible on a dependent-care policy would be doubled to $400.
But, at the same time, the company gave some of that money back -- by expanding the availability of disability coverage to all employees and by establishing a reimbursement account much like Clairson's, which provides each employee with $200 a year to spend on eligible expenses. There is no provision yet for accumulating any leftover funds from year to year, but that is coming -- along with a number of other gradual improvements to the plan. The company has another committee working on expansion of the reimbursement account, and it is hoped that its recommendations will result in a full-fledged flexible-benefits plan by this coming July. If all goes well, there will be not only new eligible categories of reimbursement, but also money available for each employee's individual benefits needs.
"Our costs are down," Arnold Miller explains, noting that the cost-containment measures in the medical policy probably had much to do with that. "We stayed even in 1982, saving the premium increase we'd normally have had, and in the second year it looks like we've saved 33%. We are increasing the flex account from $200 to $300 this year."
Jack Miller doesn't want employees to expect similar increases in coming years, however. "We'd told the employees that if the costs had gone up this year, or any year, they'd have a reduction in their flex accounts. There's no question it can change with circumstances, and they know it. But they also know they have some control over those circumstances -- by using their benefits wisely."
The reason both Claitson and Quill have seen such good response from their work forces, says Gifford, is their dedication to informing their employees of the changes coming. "If you don't want a lot of disgruntled employees," he says, it is crucial to keep the lines of communication open. "You have to explain to the work force what you're doing, and why. Most of the time flexibility isn't really a money-saving proposition, but if you know you are going to save money, you'd better be upfront about it. Because you know your employees are going to find out."
In addition, the switch from a group plan to a flexible-benefits plan puts employees in more of a decision-making role than ever before, and Gifford believes it is the company's duty to make sure the new responsibility is discharged well. "You have to remember you're asking people to make decisions that have an impact on their security and that of their families. You have to inform them [about the costs and tax ramifications of various benefits selections] in a way that doesn't frighten them."
