The Benefits Consultancy for the Apex Organization

Analyzing the industry and related issues

As the lead benefits consultant in the Human Resource Group (HRG), I provide benefits solutions by conducting internal research and on-site evaluations. In this part of the project, I intend to convince the president of Apex manufacturing why the company needs my services as a benefits consultant. I will achieve this task by addressing the reasons for the spiraling costs of healthcare which have resulted in costly employee benefits. Next, I will recommend various techniques that Apex can utilize to control the rising healthcare costs. Finally, I will prove that the proposed methods can ethically guarantee results and ensure that both Apex and its employees are winners in the end.

Why are health care costs rising so rapidly?

The United States healthcare is one of the most costly systems among developed nations. The nation’s population spends trillions of dollars yearly on its health. Healthcare is the world’s largest and only profit-driven system (Branning & Vater, 2016). The growth rate in U.S. health care expenditure has long surpassed that of the Gross Domestic Product (GDP), inflation, and population. Americans’ expenditure on health care accounted for 17.8% of the country’s GDP in 2015, and by 2025, it is expected to rise to 20.1% of the GDP. Many factors, some of which are discussed below, account for the disproportionately high costs of health care in the United States.

Since the Patient Protection and Affordable Care Act (ACA) was signed into law in March 2010, the uninsured rate in the United States has precipitously decreased. However, this progress unintentionally resulted in a constant rise in healthcare expenditure (Branning & Vater, 2016). The United States government tasks health insurance providers such as Medicaid and Medicare to offer insurance to its citizens. In this arrangement, the providers are afforded the power to raise the costs of their products.

The government, unlike other healthcare stakeholders, makes no profits as it provides care to its citizens but is motivated to save as much money as possible from its deals with providers (Branning & Vater, 2016). It is in a strong position where it can receive considerable discounts from healthcare providers. Even so, the citizens still pay substantial amounts for their healthcare and subsidized care as Medicaid and Medicare raise their prices.

All healthcare stakeholders, though to varying extents, have financial interests in healthcare. The United States, a country founded on the concept of a free market economy, is expected to uphold the features of the concept in its healthcare (Branning & Vater, 2016). In such a capitalistic system, competition drives innovation which in turn lowers the prices of products in almost all aspects of the economy. However, the reverse is true in the United States Pharmaceutical industry, where prices are raised irrespective of the supply or demand. These rising costs of drugs are eventually passed onto the insurance providers and the consumers (Branning & Vater, 2016). This way, the drug industry adds unintended repercussions and costs to a system that is already complicated.

High healthcare costs have also been fuelled by the availability of costly and highly advanced medical technologies. It is estimated that 40-50% of the yearly increase in costs can be attributed to new technologies or increased usage of old ones (Clemens, 2017). Controlling technology, thus, becomes the key to lowering the rising costs. However, ethics is to be considered since medical technology is respected as a prized element of American medicine. Patients, doctors, and medical industries are heavily reliant on medical technology, which makes the cutting of its use wrong in the eyes of many. Even those that recognize technology’s role in increasing healthcare costs are uncertain about how to effectively deal with it.

The increase in chronic illnesses such as obesity is another explanation for rising healthcare costs. Chronic illnesses, especially during the end of life care, contribute a substantial share to the costs of healthcare nationwide. “Patients with chronic illness in their last two years of life account for about 32% of total Medicare spending, much of it going toward physician and hospital fees associated with repeated hospitalizations” (Department for Professional Employees, 2016). Compared to other high-income countries, the United States has excessive cases of chronic diseases and a generally lower life expectancy. Health experts are, therefore, focusing on ways to improve health and lower the burden of chronic illnesses on the country’s finances.

The inflated healthcare prices in the United States are attributed to high administrative costs as well. The country is well ahead of other high-income earners in terms of the portion of healthcare spending afforded to insurance administration (Department for Professional Employees, 2016). Although some administrative expenditure is necessary to deliver healthcare, a huge share of the costs is utilized in activities that are not essential to patients’ healthcare quality, such as billing and other insurance-related practices.

The definition of the term “administrative” is different in various contexts, making it difficult to precisely distinguish between private and public costs of administration (Department for Professional Employees, 2016). Additionally, the government tasks private companies to handle some of its administrative essentials. It is evident that larger companies use a smaller share of their overall spending on administration. The national estimation, thus, indicates that almost half of the annual expenditure is wasted on administrative costs.

Patients, the primary stakeholders in any healthcare structure, are also responsible for the spiraling costs. Although they often suffer due to misaligned incentives, they are partly responsible for the rising healthcare costs since they are only willing to pay the least amounts possible out of pocket (Branning & Vater, 2016). Patients are conditioned to be served by free or less expensive healthcare since health insurance providers cover most of their expenses. By not considering healthcare as a service that they can spend out of pocket, patients are less motivated to actively take part in lowering costs. For instance, they may be disinclined to make dietary changes to reduce their levels of cholesterol when the same results can be achieved by a one-a-day pill.

The United States healthcare differs from those of other industrialized nations in its pricing. The specialists, doctors, and other care providers all earn considerably higher amounts in the U.S than in other countries. The health care providers in the United States spend far much on their medical education as well as insuring themselves against malpractice than their counterparts in other nations. The legislative changes enable them to join unions, and they are, therefore, able to demand higher costs for the existing services they offer (Martocchio, 2017). The cost of running an office in the U.S is also disproportionately high.

What can Apex do to control costs?

Companies can offer attractive benefits and retain top-performing employees while keeping benefits costs under control in spite of the related challenges. While most would suggest introducing employee contribution through deductibles, there are also other effective techniques for controlling costs. These techniques ensure that both employers and employees save money. Since Apex is optimistic that it can control the increasing costs without having to burden its employees, I suggest some changes that it can make to control costs. These proposed changes, discussed below, will target the key elements that contribute to the rising cost of benefits and also ultimately help make them more affordable for Apex.

In its healthcare plan, Apex can consider pharmacy management techniques to control the prices of specialty drugs. The objective here is to ensure employees make the best decisions with regard to medication (Straz, 2016). For instance, practices in general medications can involve demanding prior authorization before a prescription is filled and employing quantity limits or step protocol to urge employees to first experiment with less costly drugs. There are also particular techniques for specialty medications. Thus, a partnership with specialty pharmacies aids in controlling employee-benefit costs. The collaboration also links employees to specialty pharmacists who can assist them in effectively managing their conditions and drugs.

Apex can offer consumer-driven health plans (CDHPs) and health savings accounts (HSA) to its employees. These plans put employees in charge of their health and make prices more attainable for both employees and employers. In CDHPs, employees are accountable for a large portion of their initial costs of healthcare (Straz, 2016). That is to say, employers are less burdened by insurance costs.

However, these plans also benefit employees as they pay lower prices for premiums every month. They can also be ready for future costs by saving untaxed money through HSAs. HSAs are the same as flexible spending accounts (FSAs); the only difference is that with HSAs, employees keep their saved money even in the event of a job change or retirement (Straz, 2016). Employees, through HSAs, can pay the medical expenses deductibles, and this can lead to substantial pretax savings – particularly when those accounts receive employers’ contributions.

Employers can control the costs of diseases by going to their source. Apex can, thus, utilize this approach in which it would provide wellness programs such as nurse coaching for care as well as the condition and lifestyle management (Straz, 2016). These programs aid employees in managing their conditions and involve assistance in correct and consistent use of drugs and medicine, adhering to a proper diet and exercises, and making regular visits to the doctor’s office. Furthermore, the company can make use of telehealth as a low-cost alternative to manage its employees’ conditions.

Telehealth enables employees to access the services of health providers without necessarily visiting their offices (Tuckson et al., 2017). These services may particularly help in the treatment of mental illnesses such as depression and be beneficial to both the workers and the company. As such, employees access convenient counseling while Apex reduces its spending.

A health-risk assessment helps in understanding an individual’s health risks. As more wellness programs are integrated into organizations’ health care control efforts, health-risk assessment can be done to decide on the specific health issues of focus (Society for Human Resource Management, 2021). Organizations recognize that employees will possess more information and participate in efforts to improve health if they are taught their health risks by a confidential and customized health risk assessment. The employees will also be well informed if employers provide them with tools for improving their risk behaviors.

A health assessment can “provide a wealth of data cost-effectively, and the data can be used to tailor the wellness experience for each individual” (Society for Human Resource Management, 2021). Thus, a properly designed wellness program that provides health assessment with appropriate follow-up and personalized alternatives to meet the needs of employees will positively influence the population’s health and finances. Consequently, Apex can adopt the above-mentioned health-risk assessment to control costs, but it would do well to be cognizant of the limits of such an approach. It is a legal requirement that employee examinations be totally voluntary.

Another cost control mechanism is the negotiation of better benefits contracts with insurance companies. In this approach, Apex can be more aggressive while negotiating benefits with the vendors. According to benefits experts, “health insurance providers have a generally accurate sense of an organization’s ‘pain’ threshold: the level of premium increase an organization will tolerate” (Society for Human Resource Management, 2021).

A vendor will probably keep increasing its rates to its client yearly since it knows that most employers do not want to engage in the difficult process of re-enrolling its workforce into a new program. The insurance companies often put together administration, network access, workplace wellness programs, and reinsurance costs into one overall cost amount (Society for Human Resource Management, 2021).

When this is done, employers such as Apex may find it difficult to compare the price of each service with other providers. Still, the comparison can be made and consequently stimulate competition as services are separated and negotiated individually. The competition will ensure that providers offer better prices, and this leads to better control of employee benefits costs.

Cost control can be achieved by imposing waiting periods to restrict individuals from participating in benefits programs. These periods define the least number of months or years that employees have to remain employed to qualify for provided benefits (Martocchio, 2017). Waiting periods are usually consistent with the duration of probationary periods. Employers impose periods of probation to evaluate the job performances of new recruits, and they absolutely have the right to fire those that exhibit incompetence (Martocchio, 2017). Implementing waiting periods by Apex, therefore, assists the company in controlling costs, and it can even extend such periods for longer so it can save on maximum costs. However, there is a limit of 90 days for healthcare benefits, as indicated in the Affordable Care Act.

Costs can also be controlled by conducting a utilization review. This is an assessment and review of the services and their fees as debited by health care providers (Martocchio, 2017). Many employers have realized that some services rendered by medical personnel are non-essential, wrongly billed, or intentionally overcharged. As a result, both employers and insurance providers are demanding the audit and review of medical work through a utilization review (Martocchio, 2017).

Apex, while applying this method, can employ registered medical doctors and nurses to make certain that treatments administered to its employees are necessary and relevant to the practice of medicine. These professionals will be reliant on standards set by professional medical bodies to evaluate the suitability of administered treatment and the quality of care afforded to patients.

Utilization reviews are of three types: prospective, concurrent, and retrospective reviews. A prospective review assesses the suitability of the suggested medical service as a determinant for approving payment (Martocchio, 2017). On the other hand, the concurrent review focuses on present patients in a hospital. Insurance companies organize and carry out such reviews to determine if there is a need for extra inpatient hospitalization. Finally, retrospective reviews are conducted before an insurer disburses benefits (Martocchio, 2017).

Retrospective reviews primarily determine if the plan covers the patient, the medical problem, and the treatment administered. They also ascertain the legitimacy of claims by confirming whether medical treatments were provided and were suitable for the medical condition.

Provider payment can be utilized to lower the costs as well. These systems refer to payment plans that healthcare providers initiate with managed care insurers (Martocchio, 2017). Managed health care programs provide payment mechanisms for providers to manage healthcare costs. Fee-for-service arrangements do not usually have this provision, given that healthcare providers demand a refund after service delivery (Martocchio, 2017). For the length of the deal, payment systems for providers negotiate appropriate amounts of payment for participating doctors, healthcare institutions, and pharmacies; (usually up to a few years). Plans can provide one or more features that save costs, such as percentage discounts, capped fee schedules, partial capitation, and full capitation.

Finally, Apex can manage the costs through employee contributions. These contributions aid companies in saving money by demanding that employees pay a nominal sum of the total expenses to provide certain benefits (Martocchio, 2017). Employees often share the expenses of benefits with pretax contributions or after-tax contributions. Pretax contributions are tax rules that allow employees to omit contributions from yearly income before determining income tax duties (Martocchio, 2017).

In contrast, after-tax contributions do not reduce the sum of yearly income that is to be subjected to income tax. For instance, employers expect the employee to share with them the expenses of healthcare insurance using pretax contributions; these employers base employee contributions on their overall annual earnings.

What guarantee of success is HRG willing to make to Apex?

As a benefits consultant, I will provide Apex with various available tools, techniques, and resources and then assist it in the implementation of a plan that focuses on the company and its needs. As a result, Apex will be in possession of a strategy that is compelling for the recruitment and retention of employees, providing the best care for the employees, and is consistent with its financial goals. HRG will implement some of the cost control strategies mentioned above and incorporate other cost management approaches. These activities will guarantee Apex a successful ethical employee benefits plan that not only keeps paying competitive wages to its employees but still also largely caters to their health benefits.

The strategies recommended have been tried and tested in organizations with similar characteristics to Apex. Wellness programs, for instance, have been successful in ensuring employees live healthy besides providing various economic advantages. Companies that intend to control their rising employee benefits costs without burdening their employees ensure they participate in their sponsored wellness programs. They achieve this by motivating the employees using rewards rather than threats and punishment. If Apex adopts these programs, its employees will become healthy, which in turn lowers the company’s spending on health benefits. Healthy employees will also boost their morale and satisfaction, resulting in even a more efficient and productive workplace.

The recommended practices will be legal and in compliance with all the requirements stated in the Affordable Care Act (ACA). Affordability, Essential Health Benefits (EHB), Minimum Essential Coverage (MEC), and measurement, administrative and stability periods are just some of these aspects of ACA’s coverage (Society for Human Resource Management, 2021). Apex’s president will, therefore, be on board with my proposed plan, which not only complies with aspects of ACA but also offers more benefits. Since the president does not intend to upset employees with the idea of significant benefits cuts that will have to be introduced to control spiraling benefits costs, the plan is guaranteed to succeed.

The change process will adopt a clear and robust methodology. As such, the process will involve incorporating benchmarking information, meetings with company staff, and researching the market to make modifications that are consistent with current market changes. HRG will assess how these changes will impact Apex manufacturing and structure different scenarios to avoid any nasty shocks later. An already proven discovery, design, and delivery methodology will provide the information, data, and research needed to make proposals for change.

The process will be founded on research and proper due diligence that complements the agreed-upon approach to be employed. HRG will have all the information with regards to the needs of the employees and Apex by using a data-driven strategy. The employees must feel that their well-being was taken into consideration while modifying current plans in order to accept the changes. This will enable HRG to quickly garner the support it requires from employees and deliver change. An inclusive program will, therefore, have a higher probability of success.

HRG will assess the impact of the changes on employees. It will focus on a strategy that ensures maximum winners and, as such, introduces other benefits as tradeoffs against the suggested premiums. These additional benefits will help make the new plans more acceptable to the employees. HRG recognizes that introducing changes to the current benefits plan and demanding that employees contribute financially to these changes will be a huge sacrifice on their part.

To ensure that employees also come out as winners, HRG will offer benefits that will take off some financial pressures from them and give them the feeling that they are gaining something from the changes. This will increase their likelihood of accepting the modifications and thus guarantees the success of the new plans.

The change process will entail clear communication of the elements of the new plan to the employees. HRG will commence by clearly indicating what the adjustments will be and how they will alter the long-term business strategies of Apex. The information will have to be filtered through appropriate channels of communication for employees to know what’s happening and understand that their views are respected by Apex. Department managers and supervisors will be hugely beneficial in this process since they are familiar faces to the employees who are likely to listen to them better than any outsider.

HRG will regularly review the entire change program after implementation to better understand its progress. This post-implementation will ask two questions – what went well? And what needs to be further modified in the next open enrolment period? There will obviously be changes that employees will embrace and those that they will find it hard to cope with and fully accept. These changes that seem unpopular will be restructured while putting into consideration the reasons for their rejection by the employees. The improved versions of the modifications will then be introduced in the next open enrolment period of the company.

HRG will also ensure that its recommendations align with Apex policies and procedures. The company’s procedures for making changes will be reviewed and followed throughout the process of making adjustments to the benefits. Since the company values its employees’ opinions and well-being, HRG will try and deliver a plan that abides by the legal standards as well as the ethical codes of the company. By following familiar procedures with employees, HRG will also be enhancing the popularity of the new plans. In the end, there is a great chance of success.

Auditing the medical plan

Self-Insured v. Fully Insured Plan

Self-insured plans are health plans in which the employer pays benefits directly from its assets. In this plan, the employer “determines what benefits to offer, pays medical claims for employees and their families, and assumes all of the risk” (Martocchio, 2017, p. 129). The assets used in the payment of benefits are either fund allocated beforehand in case of future claims or the present cash flow. Companies decide to self-fund for financial reasons, such as when the costs of self-funding for employees’ medical plans are less than what it would require to task the coverage to an insurance company (Martocchio, 2017). When the company self-funds rather than paying premiums to an independent insurance provider, it preserves the funds for present cash flow.

Companies need to deposit surety bonds in a self-funded approach to enable them directly pay the claims of their own employees. Self-insurance is a popular option among employees looking to get insured. The approach affords the employees greater discretion to administer their own risks (Martocchio, 2017). Nonetheless, the companies using self-insurance have to pay their employees similar benefits provided by state-funded or private insurance providers. Employers may decide to self-fund their health coverage to avoid state insurance taxes and state benefits directives. These laws and mandates, as well as some Affordable Care Acts rules, do not apply to self-insured companies.

The plan also gives the employer more control over the design of the coverage. Consequently, the employer can develop personalized health solutions that reduce the overall costs of claims for its population. Still, there are downsides associated with self-funding such as significant assumption of risk by the employer. Savings are not usually immediate and might take considerable time to develop. In a self-funded plan, the company also has to deal with all the insurance elements, such as denied claims and numerous administrative tasks.

On the other hand, fully-insured plans involve a relationship in which a company contracts one or more insurance providers to issue medical coverage to employees and their beneficiaries. In a fully insured plan, the insurance provider shoulders the risk of paying medical claims, and insurers are responsible for administering the coverage (Martocchio, 2017). Unlike a self-funded plan, the practices involved in a fully insured plan are regulated by state laws. The premiums in the plan are also costly, and businesses have to annually negotiate contracts with providers.

Communication of coverage benefits is often challenging, and the tax burden on employers is usually higher. Still, the plan is beneficial in so many ways, such as the protection from unexpected claims. Fully insured companies can also negotiate for better rates from providers and shield their employees from spiraling medical costs.

It would be in Apex’s best interest to self-insure its plans. The approach seems best suitable to the company, and any potential liability can be limited by stop-loss coverage. Stop-loss insurance offers protection to self-insured companies against claims exceeding self-funding limits (Martocchio, 2017). More companies prefer this approach to traditional group health coverage and benefits programs. This is partly due to the major rise in healthcare costs which has resulted in high premiums and deductibles on group plans offered to employees by employers (Moorcraft, 2020). Apex should, thus, consider self-insurance for its huge workforce as it is a relatively safe and cost-effective choice when compared to fully-insured plans.

Introduction of Managed Care

Managed care is appropriate for use in a big company such as Apex. Managed care plans emphasize the management of costs, quality, and accessibility of medical services through both patient and health providers’ control approaches. These plans “attempt to integrate both the financing and provision of health care into one organization” (Buchbinder & Shanks, 2016, p. 326). Three primary forms of managed care are discussed below and include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

Health Maintenance Organizations (HMOs) are often regarded as delivering prepaid medical services. The reason: fixed periodic registration fees only cover HMO members for all essential medical services when the services are supplied to the specified network by the medical providers and authorized by the HMO. In general, HMOs provide hospitalizations, outpatient and emergency room care, as well as services from doctors, surgeons, and other medical professionals (Martocchio, 2017). Most health products are either completely funded products or copayments available, as in the case of certain HMOs.

HMOs, assign some of their doctors as primary care doctors, typically a general practitioner or a family practitioner. HMOs designate a primary care physician for every member or ask each member to select one (Martocchio, 2017). Primary care doctors assess if patients require specialist care. HMOs use primary care doctors to manage costs by considerably limiting the number of needless specialist visits. Payments are required to make copayments in HMOs, and some of the most common HMO copayments are applicable to visits to the physician’s office, admissions to hospitals, prescription drugs, and services in the emergency rooms.

In Preferred Provider Organizations (PPOs), a designated group of health insurers agrees that the healthcare services provided to a given population will be reimbursed at a lower cost compared to fee-for-service arrangements. Medical professionals are chosen as preferred providers by satisfying quality requirements, agreeing to observe the PPO’s cost control procedures, and also accepting the reimbursement structure of the PPO (Martocchio, 2017). By providing financial incentives to use the chosen providers, the employer, insurance firm, or third-party administrator helps guarantee the provider medical personnel a minimum patient load.

A point-of-service (POS) approach incorporates aspects of fee-for-service plans and health maintenance organizations (HMOs). In particular, POS plans are almost similar to PPOs. Other than HMOs, POS plans allow for primary care professionals to be selected. For any visit to a specified network of doctors, employees pay minimal copayments (Martocchio, 2017). In this respect, POS plans closely resemble HMO plans. However, POS policies offer workers the alternative of being cared for by health insurers outside the designated physician network, but employees pay slightly more for that.

Managed care is beneficial to both employees and employers in ways such as providing immediate medical solutions for families and assisting in lowering health care costs. Management of prescriptions is also less expensive through managed care options, and a certain level of care is guaranteed to the patients. Still, it has its downside as it allows for no patient privacy. Wait times for all patients in this option are also often extended.

Handling of Deductibles, Coinsurance, and Out-of-Pocket Maximums

Deductibles

The deductible denotes the price an employee departs with for medical services before the insurance benefits steps in. Plans often charge different deductible sums for each kind of coverage, such as hospitalization, surgical and specialist costs (Martocchio, 2017). That is to say, covered persons must pay a prescribed sum for hospitalization, surgery, and medical fees. The deductible is applicable to a specified duration, normally a period of one year, which is consistent with the company’s calendar year or the benefit plan year.

Coinsurance

Coinsurance policies are provided after the insured completes the payment of the yearly deductible. Coinsurance denotes the percentage of the insured costs paid by the insured persons (Martocchio, 2017). The insurance provider covers the difference between the total costs covered and the cost of coinsurance. Most policies stipulate 20% coinsurance, meaning that 80% of the costs covered will be paid by the insurance provider while the rest, 20%, will be paid by the insured.

Out-of-pocket maximums

As mentioned above, the cost of healthcare is rising. In spite of generous coinsurance rates, the costs that individuals are charged can be overwhelming (Martocchio, 2017). These sums often go beyond the financial limits of most people. Therefore, most coverages indicate the maximum amount an insured is required to pay each calendar year or plan year, defined as maximum out-of-pocket provision. The maximum out-of-pocket provision intends to protect individuals against huge medical bills or bills relating to the repeated occurrence of the same disease (Martocchio, 2017). Out-of-pocket maximums are often indicated as a fixed dollar sum and are applicable to costs that exceed the deductible amount.

Apex can employ utilization review and case management strategies to identify the plan’s high-cost areas. As already discussed above, utilization review is an audit of the services and their fees as debited by health care providers. Employers use utilization review to ascertain whether offered services were essential, correctly billed, and not overcharged intentionally. They hire professionals such as nurses and doctors to ensure that treatments offered to a policyholder are necessary and relevant. Utilization reviews are of three types – prospective, concurrent, and retrospective reviews. Apex can compare the costs billed to the company by medical providers and identify which part of the plan has incurred more expenses. Whether it is hospitalization or prescription drugs, it will know which portion of the plan requires adjustment to reduce costs.

On the other hand, independent case management is used by numerous healthcare plans to ensure that the necessary and affordable medical services are delivered to the insured. Registered nurses or social workers often work together with physicians to balance the patient’s medical requirements and cost containment (Martocchio, 2017). Critical health conditions that arise from injuries or diseases may be chronic or potentially life-threatening.

Through case management, Apex can plan, monitor, and assess the options and services needed to meet an employee’s health and human service requirements. In this process, the company can evaluate and identify the costs of each service provided. It will be able to identify affordable and expensive services. It can then devise methods to handle the services that would lead to high costs. For instance, the company can adjust the amounts it would pay, negotiate for better prices or look for alternatives. Such practices will no doubt reduce expenses on the medical plan.

Restructure of the Drug Plan

Medicine and drug expenses are covered by prescription drug plans. These plans exclusively cover drugs that are to be distributed by authorized pharmacists as indicated by state or federal legislation. The plans do not cover medications provided to policyholders while hospitalized or in long-term care (Martocchio, 2017). Insurers decide on the drugs that are included in the plan, the amount they will pay, and the criteria to be employed in the payment of the drugs. Copayment is a minimum payment made by an individual to access services. It is a fixed amount that one pays for an insured health care service after paying the deductible.

Currently, the businesses that want to provide prescription drug services to their workers have three types of plans available. The first, medical reimbursement plans, compensate workers for any or all of the costs of prescribed medicines (Martocchio, 2017). These arrangements are inherently tied to self-funded or independent compensation schemes. Just as indemnity plans, medical reimbursement coverage pays benefits after the annual deductible has been met by an employee. Upon meeting the deductible, the plans provide coinsurance, normally 80 percent of the cost of a prescription drug, and the difference of 20 percent is thus covered by the employee. The maximum annual and lifetime benefits differ depending on the conditions laid down in the plan.

The second type of plan, also known as a prescription card plan, is the same as managed care plans since it provides nominal copayments to prepaid benefits. The name originated from the general practice of pharmacies demanding an ID card for services (Martocchio, 2017). Prescription card programs restrict benefits to prescriptions that have been filled at pharmacies contracted to provide prescription drug services. This way, it is similar to Managed Care plans for accessing medical treatment.

The number of copayments varies between $5 and $50 per prescription. The sum depends on whether the medications follow the requirements set out in the program. This may include using generic options and categorizing prescription drugs in formularies. Formularies are lists of medicines that are clinically suitable and economical (Martocchio, 2017). Policyholders pay lower prescription drug copayments that fulfill the specified requirements. Prescription card services can be related to an individual insurance provider or be part of a well-known Health Maintenance Organization (HMO).

The third form of plan, a mail-order prescription drug policy, provides costly medicines for treating chronic illnesses, including high blood pressure or high cholesterol. Mail order services are often provided together with prescription card programs (Martocchio, 2017). Mail-order purchases have less expensive co-pay, and one mail-order program delivers drugs to persons insured by various health insurance programs nationally. This advantage does not extend to local pharmacies since they have smaller patronage that is restricted to individuals who live nearby.

Apex’s co-pay structure involves a $5 co-pay for generic drugs and a $10 co-pay for brand-name drugs. Individuals prefer generic drugs to brand-name drugs because they are less expensive but still have the same quality active ingredients as their counterparts. To reduce costs, I propose a slight increment and specification of copayment amounts to be paid by individuals for specific prescriptions. There will be three tiers of drug plans starting from the least copayment amount to the highest.

Tier 1 will be generic drugs ($8 to $12 per subscription), tier 2 will contain formulary brand name drugs ($15 to $20), and the third tier will have nonformulary brand name drugs ($25 to full cost per subscription). The reason for using a subscription plan with tiers is that employees will opt for affordable and equally effective alternatives to non-formulary drugs.

Introduction of Employee Premiums

Apex’s plan includes a $200 deductible per family member, a coinsurance plan in which the company pays 90% while the employee pays 10%, an out-of-pocket maximum of $2000 per family member, and the company pays 100% of the premium for both the employee and their dependents. There is no doubt that this is a rich plan, and restructuring the deductibles, coinsurance, and out-of-pocket maximums amounts will lead to a reduction in costs. Apex manufacturing can, thus, achieve this by the introduction of employee premiums.

In most companies in the United States, employers often pay a significant amount of their workforce’s premiums. However, in these companies, the employees also contribute to the costs of premiums. In small firms, employee contributions account for a larger share of the premium for family plans as compared to a relatively smaller portion for those working in big companies. Apex manufacturing employees will, therefore, pay relatively lower costs for benefits as it introduces premiums since the company is one of the biggest in the country.

Even though the company does not intend to upset its employees by asking them to pay premiums, the $200 deductible in Apex’s medical plan is too low and unsustainable. I recommend an increase in the amount to at least $1000. This proposed amount would still be less than the country’s $1655 average amount recorded in 2019 (Leonhardt, 2019). The amount means that the average American citizen pays $1655 for healthcare services before their benefits become active. However, those who do not have any major medical conditions often pay less. Plans in the Affordable Care Act can even be higher as individuals are charged deductibles of up to $4000 or even $6000 (Leonhardt, 2019). It is possible for Apex to offer lower premiums than the proposed $1000, but that would mean higher monthly premiums and less access to Health Savings Accounts (HSAs) for its employees. High-deductible plans will also enable the employees to qualify for the benefits more quickly. Apex will therefore save on costs as its employees assist it in paying for their health.

Since Apex offers a coinsurance rate of 90% to its employees, it means that once employees reach their deductible, Apex will pay for 90% of their medical costs while they only pay for 10%. This is still high since most employers only pay 80% of most coinsurance plans (Martocchio, 2017). Apex can, as a result, adjust its coinsurance to 80% so that the 20% is borne by the employees. Introducing this increment will lower the overall amount being spent by the company on employee medical plans.

Apex’s $2000 out-of-pocket maximum is quite generous when compared to the amounts often paid by employees in other organizations. It is estimated that individuals usually pay as high as $4500 for out-of-pocket maximums while families’ amount is often as high as $9000 (Martocchio, 2017). But there are limits to how much an individual can pay out of their pocket annually for medical access. The limit of out-of-market maximums in 2018 was $7 350 for individuals and $14,700 for families.

The limits exclude the amounts the insured pay for premiums. I would, therefore, suggest an increase in the out-of-pocket cost to $3000 per individual – a number that I believe would still be manageable by the employees. The company will no doubt reduce costs, but the employees will also benefit from this increment. When they reach the limit that they are required to pay, there will be a variety of fully sponsored services that their plan can afford them. This will mostly benefit individuals and families with serious medical conditions which require extensive care.

Formal Recommendation

Employees will only use healthcare wisely if they contribute to premiums. They will never become prudent healthcare users if they do not incur any risks. Making patients responsible for more of their healthcare is argued to be a means of turning them into better consumers. Many people believe that providing patients with sufficient information and allowing them to experience a greater share of healthcare costs would eventually achieve a cost-effective healthcare system.

They believe that patients or consumers are the keys to bringing down the increasing costs of healthcare in the country. As such, this section of the project discusses premiums that can be introduced at Apex to partly shift the healthcare responsibility to the employees. These adjustments on the healthcare premiums are presented as a formal recommendation to Apex for the restructuring of its healthcare plans.

For Apex, the following changes are recommended:

Self-insured plan:

The company will abandon its initial fully insured plan and become self–funded; a cheaper option that will also enable the company to keep its current cash flow in the process.

Covered services:

• Wellness programs such as weight loss programs and telehealth to reduce costs
• Managed care services such as health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans should be incorporated to ensure the appropriate care is delivered to employees by healthcare providers

Employee premiums:

• The deductible amount should be increased from $200 to $1000 per family member
• The coinsurance amount should be increased, and the company will now pay 80% as the employee pays 20%
• The out-of-pocket maximum should be increased, and each family member of the insured will pay $3000

Restructure of the drug plan:

• The company can introduce three tiers of drug plans starting from the least copayment amount to the highest. In these tiers, the amount of copayment will also increase:

• • Tier 1 will be generic drugs ($8 to $12 per subscription)
  • Tier 2 will contain formulary brand name drugs ($15 to $20)
  • Tier 3 will have nonformulary brand name drugs ($25 to full cost per subscription)

Additional low-cost benefits:

• • • • Increase the life insurance amount to a flat $20000
      • Introduce a retirement plan such as 403(b) plan, employee stock ownership plans (ESOPs), and profit-sharing plans
      • Introduce a flexible benefits plan to customize employee benefits

Developing a plan of implementing the proposed changes

The proposed changes will redesign the company’s medical benefits plan. As a result, the recommendations will probably be unpopular among employees as they are required to pay premiums in this new plan. To try and get them on board with the new changes, I will incorporate additional low-cost benefits as trade-offs against the premiums. This section of the project, therefore, discusses life insurance alternatives, retirement, and flexible benefits plans.

Life Insurance Alternatives

The company pays for a flat $15,000 of life insurance with no voluntary coverage. Increasing this amount to $20000, for instance, is one way of getting the employees to buy into the recommended changes. Life insurance and, most commonly, group life insurance are useful to beneficiaries who will use the funds for various expenses in the event of a policyholder’s demise. Normally, it is not advisable to increase the life insurance amount, but when it acts as an incentive, as is the case in the scenario, a company should do it.

Increasing term life insurance leads to more death benefits on the policy. It would also lead to more expenses for Apex, but if it intends to convince employees to adopt the new plans, the company will have to lose in order to gain. The employees, in contrast, will receive extra protection as time goes by to insure themselves against costs, such as an expanding family, and even shield death benefits from inflation. However, if the employee death benefits increase, employee contribution is also likely to increase.

Voluntary coverage or insurance is an optional benefit offered by the company. Similar to other policies of life insurance, it provides the policyholder’s beneficiaries with a death benefit that had been agreed upon in the plan (Birken, 2021). The insurance is often offered as an additional benefit to a basic life insurance plan at a discount because the employer sponsors it. Employees can opt for a voluntary whole life insurance policy in which their premiums amounts are deducted from payroll. An individual insured in a whole life insurance policy is protected throughout their life. An Apex-sponsored voluntary coverage will surely seem like a good gesture on the company’s part and might soften the workers’ stance on the recommended changes.

Retirement Plan Introduction

Apex manufacturing has no available retirement plan for its employees. As a way to sway the employees, I would consequently introduce a variety of retirement plans. For instance, a 403(b) retirement plan will allow workers to contribute amounts after tax deductibles, which Apex can match up to a particular percentage and the funds grow tax-free (U.S. Department of Labor, 2021). There are significant benefits for policyholders in the 403(b) plan, such as pre-tax contributions to the plans and freedom from taxation on earnings from the insured amounts until they are distributed from the plan.

Apex manufacturing can also introduce employee stock ownership plans (ESOPs). These plans enable an s-corporation to shelter profits from taxes in a retirement policy (U.S. Department of Labor, 2021). Contributions made throughout the year become deferred income unless stock is sold. The Internal Review Service (IRS) demands the making of distributions from retained earnings according to ownership. As such, the employee stock ownership plan is to receive distributions when the other shareholders receive their distributions. Due to these distributions, ESOPs with greater ownership shares may be the recipient of more benefits.

Finally, Apex can introduce profit-sharing plans in which employers choose to share the wealth by utilizing a part of its profits to sponsor a retirement plan. Although restricted to a fixed percentage of the income of the employee, the sum to be contributed totally depends on the employer (U.S. Department of Labor, 2021). Employees are not allowed to contribute, and employers can also limit the extent to which part-time employees participate in the plan. The introduction of the retirement plans suggested above is a huge benefit for employees and those that depend on them. They can, therefore, tolerate the idea of paying premiums since they are guaranteed to get benefits at the end of their employment.

Flexible Benefits Plan

Flexible benefits plans or cafeteria plans allow workers to choose the benefits they want from a menu of programs offered by the company. The diverse nature of the modern workplace has made a one-size-fits-all type of benefits offerings impractical as individuals have different needs and preferences for specific benefits (Martocchio, 2017). Employers personalize employee benefits when they offer them flexible benefits plans. In these plans, employees are afforded the opportunity to take or turn down certain benefits. For instance, a worker can choose daycare benefits over the opportunity of life insurance. This choice of daycare may be due to the fact that the employee is a young mother, and daycare would help her in her current situation compared to life insurance.

There is employee contribution in a flexible benefits plan – an amount deducted from their before-tax income. However, when these deductions for benefits are made with before-tax income, the employee’s taxable income is lowered while the amount they take home increases (Martocchio, 2017). Also, for the employer, the contributions made to flexible benefits plans are tax deductible. The contributions are taken prior to taxes and are therefore not subjected to social security taxation and federal unemployment taxation. Since the company offers no flexible benefits, providing it will undoubtedly demonstrate Apex’s commitment and recognition of its diverse workforce. This act of commitment and loyalty might easily be reciprocated by employees welcoming the proposed changes to the benefits plan.

Developing a communication plan to present changes

An organization’s handling of employee benefits communication can have an effect on the morale and participation of employees in benefits plans. When conducting employee benefits communication, several factors should be taken into account. For instance, what is the organization’s culture? Are the proposed changes causing concern to employees? Are the employees’ morals good or bad? The above-mentioned questions will have an effect on the strategy employed for communication of benefits and, thus, need to be carefully evaluated and answered before a communication strategy is employed.

Other factors that might also be considered include internal resources. Most often, a company has its resources for communication, and when rolling out a plan, these resources can be useful to a benefits consultant. These persons know the company in and out and will be useful in communicating the changes to the employees.

It is common for benefits plans changes to be made regularly to keep up with legal obligations and competitive compensation plans. When employees are made aware that they are to start paying premiums or that they are to change their healthcare providers, they might panic. However, successful communication of the benefits changes might reassure and empower employees as they prepare for the open enrollment period. In this section of the project, I intend to come up with an effective communication program for the recommended benefits changes.

What is to be communicated?

After making material modifications to the benefits plan, these changes need to be communicated to the employees. In the case of Apex, the material changes include the introduction of retirement plans, premiums, managed care, restructuring of the drug plan, and changes to the deductibles, coinsurance, and out-of-pocket maximums. A summary of these adjustments will be distributed to the employees within 210 days after the end of the current plan year to meet the legal requirements of the Employee Retirement Income Security Act (ERISA) of 1974 (Martocchio, 2017). The summaries will also be sent to the Department of Labor.

How is it to be communicated?

Various media can be employed in communicating benefits changes to the employees. Human resource departments play a significant role in communicating the value of benefits to employees as it raises awareness and provides a deeply accurate understanding of how the plans can be utilized. Printed brochures that summarize the key elements of the plan will be used to convey the “big picture” (Martocchio, 2017).

Although some consider brochures to be traditional, companies still use the method. Still, most recent communications have been through the intranet and social media of a company. As such, Apex will use the intranet, which is an effective tool for communicating benefits information to employees beyond the written documents required by law. In the modern workplace, characterized by less paper communication, it is unlikely for workers to have readily available written materials (Martocchio, 2017). The intranet allows them to review the general information regarding the benefits plan anytime they want.

The modifications will also use social media, though the method is regarded as unpopular for conveying information about its benefits. Nonetheless, platforms like Twitter, Facebook, and podcasts seem popular among the younger employees, making them an effective tool for Apex to such employees. Finally, employees will also be informed through individual and group meetings. In such meetings, there will be company managers and supervisors, representatives of insurance providers, and members of my team to ensure that the message is clearly understood and better accepted.

When is it to be communicated?

The new plans will be rolled out on the anniversary of the benefits during the company’s annual Open Enrolment period. Open enrolment periods enable insured persons a duration of weeks to assess changes to their plans for the subsequent year and make modifications to the costs of such plans. Aside from specific qualifying life events, it is only during open enrolment that employees can make changes to their benefits plans. The amount of time provided in open enrolment periods will be sufficient to get the employees on board and implement the proposed changes to the plan. This makes the period the best time for making the changes.

Who will handle the communication?

The person to communicate the information could either be a supervisor, department manager, or HR manager. However, for a message such as benefits plans modification, the most appropriate channel would be a supervisor (WorldatWork, 2021). The perceptions of employees regarding the organization’s benefits structure will, as a result, be shaped through communication with their supervisors. Employees are likely to be more accommodating to a supervisor whom they interact with on a daily basis than other persons.

The communication program enhances the effectiveness and acceptance of the new plans by employees and, as such, only correct information should be conveyed by the supervisors. To achieve this, the supervisors will have to be trained by the HRG team to aid them in communicating the most accurate and latest information. The supervisors will need to have the correct answers to any of the employees’ concerns. The plans have to be viewed as fair to be accepted, and the communicator must perform this task to perfection.

The employees may rightly express their dissatisfaction with the adjustments and will probably compare the changes with other organizations the size of Apex. When they realize that the proposed rates are still very fair and that the company had no other choice other than to introduce premiums, they will understand the situation.

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