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By Paul Fuhrman, SFM
Mutual Insurance Company
A survey of what
State Funds are doing to reduce expenses without sacrificing quality
was completed by the AASCIF Finance and Investment committee in late
May. The survey provided information on steps being taken in
this area. Over 40 invitations to the survey were sent out and
of this total, there were 10 respondents.
The survey questions
addressed both broad areas like staffing models and process redesign
initiatives as well as deeper dives into specific areas like
renegotiations of vendor contracts.
A summary of the
survey results shows the expense reductions occurring are not across
the board cuts but are focused on process design improvements
including automation and scanning of documents. Personnel
reductions were primarily in clerical or administrative staff.
Results also indicated less of a concern on salary competitiveness
in this economic environment. For specific expense reviews,
almost every respondent indicated third party vendor contracts were
being renegotiated. Also, health care costs were being
contained by some combination of increased employee cost, increased
deductible level and/or wellness initiatives. Finally, WebEx
or other teleconferencing tools are now being used by all but one
respondent as a way to reduce travel expenses.
While economic times
and the insurance market are indeed tough right now, the survey
responses and comments indicated to me a lot of the changes
occurring in expense reduction would happen anyway. Most of
the respondents indicated process redesign was a constant in their
organizations, not a one-time deal. Automation of processes
and the elimination of the more clerical positions have been going
on for awhile and will continue as well. In addition, health
care costs have been on our radar for some time as well. It
was interesting to see only one Fund instituting across the board
percentage cuts to budgets. I feel those types of cuts reduce
the quality of service provided by treating all areas the same
instead of looking for the inefficient areas of the Fund and fixing
them first.
A more detailed look
at the survey questions revealed the following:
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Respondents were split 60/40 for use of staffing models.
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Only one respondent had across the board percentage
cuts to their budgets.
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Two respondents indicated severance buyout of employees
– one of which was related to the implementation of a new
claims system.
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Eight respondents are currently involved in process
redesign initiatives. Four of those indicated they do so on a
regular basis.
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Significant enhancements to streamline efforts
included: payroll audit (2); claims (1); medical bill review
(1); accounting/finance initiatives (3).
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There was little use overall of outsourcing, interns,
and contract labor.
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Respondents indicated the tasks or functions which have
been or are being eliminated are in the clerical or
administrative areas primarily through process automation and
paper document elimination.
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Six of the respondents noted they didn’t feel in
these economic times that keeping quality personnel is an
obstacle – “employees are grateful to be employed.” The
other four respondents identified deferred compensation, defined
benefit pension plans and management bonuses as ways to keep
salaries competitive and attract/retain quality people while
keeping personnel budgets flat during tough economic times.
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Nine respondents use WebEx or some form of
teleconferencing to reduce travel expenses.
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Seven respondents indicated they have renegotiated
terms with outside vendors split evenly between asset managers,
landlords, actuarial firms and IT consultants.
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Only three respondents indicated they have pressured
investment managers to lower investment fees due to portfolio
losses in the last year.
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The majority of respondents indicated they are containing
fund medical costs by increasing employee cost, increase
deductible, and wellness initiatives. Fewer respondents
control costs by using an HSA or self-insured plan.
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