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Controlling Benefit Cost and Spending By Creating Your Own Marketplace

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healthcare on January 23, 2014 - 3:29 pm in Self Funding

According to a recent survey of 1,400 CFOs across companies of all sizes, there are/were two issues that represented about 70% of their concerns: 

  • Employee benefit costs
  • The ability to control spending

Both of these are inextricably linked.

Many CFO’s expect their firm’s benefit costs this year – and next year – to rise even more than in previous years due to the cost of Obamacare; many more are concerned that no one seems completely certain about the full impact on their business or what the unintended consequences of the new law(s) may be.

Companies are reported to be considering a wide variety of options to offset these costs; including increasing amounts paid by employees, raising product prices, and eliminating employer sponsored insurance altogether.

Controlling other areas of administrative spending is no less challenging. 

Given the uncertainty of economics, politics, and regulation, CFOs are reluctant to increase spending levels despite a recent but modest uptick in sales.

At every turn it seems that life in general – and business in particular – has become more difficult, more complex, and somewhat uncontrollable. 

And so I propose a course of action:  Adopt a strategy of simplification.  Get rid of the complexity.  Seize the initiative!

After 30 years and 1,100 implementations of eProcurement control systems – and countless cost improvement projects for our clients- we are convinced that:

  • Supplier competition produces the best proposals
  • Simple processes can be automated and work better than complicated ones
  • Automated processes are more accurate, are faster and ultimately less expensive
  • The internet is everywhere and businesses are learning how best to utilize it

Our proposal to have CFO’s regain control is like the first leap from a flying trapeze; it’s exciting, yet extremely intimidating.  Our solution?  Create your own marketplace.

Modern procure-to-pay cloud software is a “Marketplace in a box.”  It’s available today at very low cost and comes pre-configured with work processes that are simple, intuitive, and efficient.

By adopting this software, companies are immediately required to conform to its workflow requirements.  They can instantly streamline and automate those areas of purchasing, accounts payable, and accounting that need it the most.  Modern software supports AP invoice scanning that immediately provides matched purchase orders, receipt records, and invoices taking days – if not weeks – out of the requisition-to-check timeline, earning discounts, and avoiding missing bills.

For some companies this may be the first time that they had confidence they could even be sure they knew where all their invoices were.

The same technology opens up the world of potential suppliers through simple and efficient internet auction techniques.

“Look for more vendors, we already have too many!”  Will you hear this?  Contrary to most logic, the answer is yes.  Look for the best vendors and choose the right ones; eliminate the rest.

Amidst the often confusing maze of HR benefit proposals and alternatives, there is another hidden reality and truth…  Employee Benefits are not an art; they are another important category of services to be purchased.  Typically (at most employers), the negotiation and procurement professionals are never consulted on benefit vendor selection or proposal evaluation.  This is a crucial mistake.

Buying these services should be done using the same business process used to find vendors to buy other services (i.e. your new marketplace).  Why does this make sense?

The reality today is that all employee benefits are voluntary.  There is no certainty that any component of health insurance will be accepted and paid for by an employee just because it is offered.  The right benefits, however, are still critical elements of employee satisfaction and retention.  This means finding the right insurance broker and the right health plans. 

The more that a company can move towards a defined-contribution and value-added benefit programs, the more closely these benefits will fit into the categories of expense and “apples to apples” comparisons that can be managed using internet procurement tools and proven procurement sourcing procedures. 

Companies can expand the universe of vendors to find those that represent the best value.  

To address the concerns of the CFO, in all areas of administrative spending – including employee benefits – engage your procurement professionals, use the right search and comparison tools, and expand the number of potential vendors.  After this is completed, select the right vendors and plans for your firm from the expanded pool. 

Cafeteria plans, value added benefit plans, and defined contribution plans all make the procurement process more effective.  The right tools – including your own internet marketplace – will make it happen.

In your administrative spend marketplace, the shopping cart is always in motion and the best vendors are always welcome.  Your internet procurement web never sleeps.   It’s a place where services and goods – including health insurance, dental, vision, and pharmacy benefits – are continuously being bid upon; and the value is being optimized in favor of the employer group.

In this marketplace, requests for services and vendor commitments are fully visible and fully auditable.  Costs are reduced by competition and prior approval workflows.  The manual processes of writing requisitions, laboring over RFP’s, typing P.O.s, processing paper invoices, writing and mailing checks, are no longer needed because they are now electronic – electronic processes that are at the leading edge and that are far lower in cost.

The do-it-yourself marketplace routinely adds black ink to the bottom line.

What are you waiting for?  Go ahead – take the leap!

About The Author

Dennis Toohey is the Director of Solutions for Puridiom and was the author of the article “Benefits of eProcurement for Health Plans” which appeared in the March issue of Corporate Wellness Magazine.  His 20+ years of experience include Procurement management and systems, strategic sourcing, and supply chain management for companies such as Blue Shield of California and North American Philips.  Dennis is a BBA and MBA graduate of the University of Notre Dame.

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