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Manufacturers Seek Resources to Regain World-class Status

Dangerous Liaisons

Until 2004 Freescale Semiconductor was the semiconductor chip manufacturing unit of Motorola. That year Motorola spun it off as an independent company, which forced the in-house Health and Wellness team to rethink the way it was offering health care benefits.

Though Freescale was a billion dollar company, it ran a lean operation. Its internal Health and Wellness department was comprised of three individuals taking care of the health care needs of 9,000 Freescale employees in the United States. According to Sandi Aitken, Freescale's global benefits manager, the general dilemma she was facing was how to create a compelling offer for existing employees while attracting new employees and retaining those who had worked at Motorola and were used to good benefits.

Freescale decided this was hardly feasible with a three-person team and opted for an outsourced solution from Hewitt Associates that would maintain the head count in house while improving health care services at the same time.

A host of services from a single supplier

However, to complicate matters, Aitken says, "We were trying to make significant changes in our health care plan and avoid employee disruption at the same time. Someone likened what we were attempting to do in the spin-off as trying to change the tires on your car as you were driving 70 mph down the road."

For instance, Freescale was in the process of eliminating its retiree medical plan so no new participants could join. "We maintained about 4,000 retirees who'd retired from Motorola and were relying on a whole new company they'd never heard of to provide them with their benefits. So it was important to provide them with peace of mind," says Aitken.

Hewitt was immediately useful. It established an easy-to-remember phone number (SSL-BENS) which employees could call with questions about their benefits. SSL is Freescale's stock symbol and BENS is short for "Benefits." Aitken wanted to keep communication with employees as simple as possible, and this did the trick.

Hewitt also instituted a flexible health insurance program by which employees can build their own health insurance package. They simply have to answer four questions:

1. What is their deducible?
2. What is their co-insurance?
3. What is their co-pay when they visit a doctor?
4. What is their prescription coverage?

For instance, younger employees can structure their plans so they pay only a little a month because they are in good health. Older employees typically have different needs. They may have a spouse or children with chronic illnesses and need much more care, so they can build a plan with a low deductible and low-co-insurance that better suits their situation.

Hewitt also offers a program called "People Like Me" that lets employees more accurately determine their own health care requirements by modeling other employees with similar health profiles. Employees can choose from 96 scenarios that Hewitt has designed based on four questions: age, gender, family situation (single, married, etc.), and health care utilization.

Based on the answers, employees get two scenarios of what people like them are selecting for their insurance needs. Aitken says, "We found in the last enrollment period 70 percent of the population modeled the plans and made changes based on the information we provided. So it really helps people become informed and engaged consumers."

Hewitt also manages employees' Federal Spending Accounts and Dependent Care Accounts, so employees can put aside pre-tax dollars for their health care for medical services not covered by their insurance. Aitken says, "That's really a great deal. We worked with Hewitt a lot this past year promoting those tax-saving features. It's like giving yourself a 30 percent pay increase." She adds that since Hewitt started managing the services, employees' use of them has increased 10 percent.

What's more, as part of its wellness offering, Hewitt provides three fitness centers with concierge services in Austin, Texas, and two in Phoenix, Arizona. Here, employees can exercise and do yoga any time of day. For a small fee, a concierge will run errands employees would typically do on nights and weekends. Hewitt also offers resource and referral services so that employees can find childcare centers located nearby, determine their rates, and learn whether or not there are openings in the child's age range. They also provide information about how best to care for an aging parent; for example, how do you place one in an assisted living center?

Hewitt also provides a call center. Employees can call a knowledgeable customer service rep with questions about their health care plan. If employees elect not to use the call center, Hewitt provides a portal and an external Web site where they can go to inquire about their coverage. Aitken says "91 percent of our employees enrolled online at the Web site. Nothing could be easier for employees to remember how to get there." In either online location, employees can perform activities like checking on their flexible spending accounts. Both locations contain the same information.

Simpler service and big savings

The partnership with Hewitt has radically simplified service. "We have a one-stop shop where employees can go to get all their benefits information," says Aitken.

But, she adds, the Hewitt solution also "really drives home that message of consumerism. As an employee I need to be responsible in understanding what my benefits are, know that I can go to one place to see how much they cost, and make decisions about some pretty complex personal issues."

The savings Freescale has achieved are impressive also. It was paying multiple providers when part of Motorola. Now that it has consolidated all services and costs with Hewitt, it's saving millions of dollars a year. Aitken explains that "the inflation of health care costs was 12 percent over the last three years. With the help from Hewitt in designing and managing our plans, we've been able to eliminate those inflationary costs through economies of scale. Every year we see cost reductions in our medical claims."

Aitkens asserts that, instead of being just another service provider, Hewitt is "an extended part of our team. We might be small -- there are only three of us -- but it's like we have an army standing behind us."

Lessons from the Outsourcing Journal:

• When a health care supplier offers multiple self-service methods like a phone number along with a Web portal to inquire about benefits, the buyer's employees become more knowledgeable consumers and in-house staff is more efficient because it's tasked with fewer non-value-added duties.
• By offering flexible health insurance programs that let employees structure their own coverage, health care suppliers let employees more accurately meet their health coverage requirements.
• By helping employees model other employees with similar health profiles, health care suppliers encourage employees to be better consumers by building a customized health care plan.
• By consolidating all health care services with one provider, the buyer can take advantage of economies of scale to meet dramatically rising health care costs.

Publish Date: January 2009

Copyright © 2009 - Everest Partners, L.P.

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