Question

In: Operations Management

​Consider the milestones that must be achieved to reduce the cost of the health insurance being provided. Provide a timeline that is realistic.

Consider the milestones that must be achieved to reduce the cost of the health insurance being provided. Provide a timeline that is realistic.

Consider the following case: Plumeria Inc. is a local employer of more than 5,000 employees that manufactures metal parts for automobiles. It provides health insurance for its employees and their families. Over the last five years, the premium costs of the insurance have been rising at an average rate of 30 percent annually. Next year, the premium is expected to rise another 28 percent. Health benefits now account for more than 30 percent of the cost structure. The operating margin for the company is 3 percent per year. Revenue growth during the same period has been 8 percent per year. Health costs have grown faster than revenue growth. The company's chief financial officer has advised that next year's budget will show a 1 percent margin, and if the cost structure does not improve, the company will operate at a loss in two years. Leadership has identified that, along with a general cost-cutting strategy, a targeted reduction in healthcare costs is critical to ensure sustainability and profitability. You are the company's chief human resources officer.

Solutions

Expert Solution

In order to reduce the cost of health insurance that is being provided, we need to consider the most critical and important treatments and must provide insurance to only those problems. We also need to ask the employees to submit complete bills. We need to select only few of the family members like wife and parents along with minor children to provide insurance . The employee must also submit a fitness certificate before joining the company and any problems related to drinking or smoking will not be provided insurance. These steps will help the company in cutting the insurance costs and increase the revenue . This process might take a while and might receive some opposition from employees but it helps in reducing the costs to the company and help it in preventing running in loss.


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