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HUMAN RESOURCES

Sounding the Retreat
 

Company worked with employees to cut costs by eliminating or downgrading some benefits.
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Once you give employees a benefit, it's hard to take it away. But Timothy Ross decided that dental and health insurance were no bargains for his company or its employees, so he's reducing benefits at Future HealthCare, a $2.2-million Cincinnati business that conducts pharmaceuticals research. And he's averting outrage by discussing his decision with full-timers beforehand.

Before he canceled dental coverage, last year, president Ross asked employees to rank a variety of benefits in order of preference and to estimate the monthly cost to the company of its health-care program, which it pays for in full. Health and dental insurance ranked first and second on the survey, which also hinted that Future hadn't communicated the cost of benefits and the trade-offs that could be made.

Ross gave employees information from the U.S. Chamber of Commerce's benefits survey and compared Future's benefits with those offered by others in the health-care industry and with companies, in all industries, of the same size as Future.

He also performed cost-benefit analyses of expensive benefits, to inform companywide discussions. The company was paying $600 in premiums per employee for a maximum of $1,000 in benefits, and most employees were not using up that $1,000. "They had no perception of what benefits cost," Ross says. "When we showed them, they preferred the cash." On this year's employee-preference survey, dental insurance ranked fifth, behind the new 401(k) and performance bonuses -- benefits made possible, in part, by canceling dental insurance.

Ross next plans to limit health-care benefits. This year he increased the deductible and gave employees an incentive to hold down time-consuming small medical claims. If employees keep claims below the deductible, they receive a year-end, after-tax bonus of twice the remainder. Future's deductible is $500, so if an employee claims only $200 for the year, he or she receives a $600 bonus. That encourages employees to pay for small medical expenses out of pocket, which should keep rates low.

Ross is carefully explaining the changes to employees in nine locations. (Future is preparing a video explaining the new program, to be produced in-house for about $1,000.) Savings left after bonuses are paid will go first into a trust fund and eventually into additional benefits, such as reimbursement for continuing-education programs important to Future's professional staff.

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Timothy Ross uses information from the U.S. Chamber of Commerce's annual employee-benefits survey to give himself and his employees context for benefits decisions. The $25 survey presents census data on every kind of benefit, broken down by industry, company size, and employment status. To order it, call 800-638-6582.

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Last updated: Oct 1, 1993




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