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IGT When Salary Cuts Are Not an Option

VP Randy Kimer says cutting benefits is "distasteful."

September 18, 2003
Related Topics: Benefit Design and Communication, Health and Wellness, Compensation
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International Game Technology, a supplier of slot machines and other gamingdevices based in Reno, Nevada, has been hit by double-digit health-benefit costincreases for its 4,000 employees. The message was clear, says Randy Kirner,vice president of human resources. "Either we make significant interventionsto manage costs, or suffer cost increases outpacing our corporate revenue andearnings growth. Our dilemma on the employee side was equally compelling. We arean employee-oriented company and felt it was unfair to shift costs to employeesto minimize corporate responsibilities. Cutting benefits was also distasteful."Cutting salaries or wages was "absolutely not an option," Kirner says. IGTis a growing company operating in one of the tightest labor markets in thecountry. Unemployment in Reno is a mere 3.2 percent.

    Kirner turned to aggressive vendor management and new plan designs to controlcosts without cuts in wages or benefits or increased cost-sharing. "We engagedour broker, ABD Insurance and Financial Services, and other key stakeholders,"he says. The result was a top-to-bottom re-evaluation of administration anddesign based on a careful analysis of utilization and options. The firmconsolidated two company health plans into one PPO, which enabled it to submitRFPs to third-party administrators. "We determined we wanted to look atvendors offering catastrophic and large-case management, disease management,maternity management, and electronic access for the company, providers, andemployees," Kirner says. The company chose a vendor on the basis of theseneeds and anticipates saving more than $1 million.

    IGT also moved pharmacy management out of its PPO and into a separatecompany, which resulted in first-year savings of $300,000. In the process, thecompany identified an opportunity to change its delivery of specialty drugs, foradditional savings of $25,000 a year. It also outsourced its COBRA/ HIPAAservices, saving more than $25,000, and self-insured its vision plan. Inconjunction with a new HRMS implementation, IGT tapped a data clearinghouse toimprove benefit-billing accuracy.

    IGT renegotiated its employee assistance program as well as short- andlong-term disability and AD&D contracts for additional savings, and gainednew features such as direct claim services and travel assistance. Finally, thecompany outsourced flexible spending account management, which increased servicelevels for employees while reducing internal costs. Kirner spent a great deal oftime on the vendor and design overhaul. "The process was detailed and involvedmany, many sessions and decision points," he says, "but the projectedsavings will ease cost pressures." IGT carefully communicated the changes toemployees. "Overall, employees were prepared for the changes and felt that thecompany had done its homework," he says.

Workforce, March 2003, p. 40 -- Subscribe Now!

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