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  • 1. August 2010 Document K22ROI CASE STUDYBENEFITFOCUSMORGANITE INDUSTRIESTHE BOTTOM LINEBy adopting the Benefitfocus HR InTouch Application and the BenefitfocusHR Support Center, Morganite Industries improved productivity andlowered benefits costs.ROI: 178%Payback: 7 monthsAverage annual benefit: $438,418THE COMPANYMorganite Industries is a manufacturing subsidiary of Morgan Crucible, a UnitedKingdom-based provider of ceramic and carbon-based products used in a widevariety of industries. Morganite, as a United States-based subsidiary,manufactures products from carbon, metal, and ceramics that are then sold by itsparent company. Morganite has 10 operations in several states throughout theSoutheast and 2,500 employees.THE CHALLENGEMorgan Crucible grants its subsidiaries a great deal of autonomy in how they runtheir businesses. Although the resulting entrepreneurial cultures in these operatingunits increased profitability over the years, senior management recently decidedthat some functions should be centralized in order to better manage costs and takeadvantage of economies of scale. One of the major items Morganite wanted tomanage better was the cost of providing insurance benefits. Some of thechallenges to better control of insurance costs included: Autonomy. Like its parent, Morganite had delegated responsibility for health insurance benefits to its local operations. Complexity. Autonomous management of health insurance led to a proliferation of insurance vendors. The organization had 20 different plans for just 2,500 employees. One operation had seven plans for only 250 employees. Labor intensiveness. Because of the number of insurers and plans, administrators spent too much time assisting employees with routine questions. Cost. Because of the number and complexity of insurance relationships, the organization selected its insurance providers based on their ability to assist with reporting challenges rather than their price competitiveness.Corporate Headquarters Nucleus Research Inc.Nucleus Research Inc. NucleusResearch.com100 State StreetBoston, MA 02109Phone: +1 617.720.2000
  • 2. August 2010 Document K22 In order to reduce the workload for benefits administrators and make vendorTOPICS selection more cost focused, Morganite decided to deploy an application that wouldEmployee ManagementApplications automate the completion of day-to-day tasks such as addressing employees’ coverage-related inquiries. THE STRATEGY In August 2009, Morganite decided to adopt both Benefitfocus HR InTouch and Benefitfocus HR Support Center. No other vendors were considered. Morganite was familiar with Benefitfocus because its insurance carrier used it for online enrollment and data exchange. As a result, Morganite was confident the two Benefitfocus applications would have both the scale and granularity of reporting it needed. Benefitfocus was also chosen because its solutions are Web based and focused on employee self-service tools that are designed to lighten the workload of HR administrators. The application was deployed by the company’s benefits manager over a 13-week period. The deployment was streamlined since most of the data was already integrated with Morganite’s insurance carrier. The benefits manager heavily involved the managers of the company’s 10 operations and held weekly meetings with them. These meetings were used to establish business requirements, fine tune the application, and address cultural issues. Many Morganite employees were accustomed to addressing benefits issues in person with HR administrators they had known for a long time. In order to ease the transition to online self service, the benefits manager and the local managers created newsletters and held meetings with employees. Both were aimed at helping employees understand how to use the new applications and how the tools would improve their ability to manage and understand their benefits. The applications went live in the fall of 2009 and employees used HR InTouch to enroll in their benefits online for the 2009 to 2010 coverage year. Additionally, for each dependent enrolled by an employee, Benefitfocus HR InTouch prompted a process that would validate the eligibility of that person as a dependent. This enabled Morganite to audit the eligibility of every person covered under its plans. KEY BENEFIT AREAS Deploying Benefitfocus HR InTouch and HR Support Center enabled Morganite to perform a cost-reducing audit and improve the productivity of employees and HR administrators. Key benefits from the solution include: Improved employee productivity. Prior to the deployment, whenever employees had questions about insurance coverage, they interrupted work to visit the HR department and make an inquiry. They now take care of inquiries online using Benefitfocus HR InTouch. As a result, employees spend 75 percent less time on such inquiries and often take care of them on their own time rather than at work. Improved HR administrator productivity. Because employees now use Benefitfocus HR InTouch and HR Support Center for inquiries and benefits administration, they require less assistance from HR administrators. Two of these administrators at smaller facilities with narrower job responsibilities will be laid off or redeployed. The other nine have become 20 percent more productive. © 2010 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited. Nucleus Research is the leading provider of bottom line-focused technology research and advice. 2 NucleusResearch.com
  • 3. August 2010 Document K22 Reduced coverage costs. Because Benefitfocus HR InTouch and HR Support Center make it easy to exchange information with employees, Morganite used the deployment as an opportunity to perform a dependent eligibility audit. More than 100 people who had been receiving benefits were found to actually be ineligible for coverage. By discontinuing coverage of these independents, Morganite significantly reduced its benefits costs. BENEFITS Indirect 36% Direct 64% TOTAL: $1,315,254KEY COST AREASSoftware, personnel, and training were key cost areas for the deployment.Software costs consisted of one-time start up fees for use of the Benefitfocusapplications, as well as annual subscription fees, which are based on the number ofemployees accessing the application. The deployment was completed over a 13-week period by Morganite’s benefits manager with the assistance of 10 local HRmanagers, who all received half-day training sessions on how to use theapplications. COSTS Personnel Training 1% 1% Software 98% TOTAL: $828,363BEST PRACTICESOne of the reasons the deployment was so successful is that the benefits managerinvolved the HR managers of Morganite’s 10 local operations. Over the years,Morganite’s managers had become accustomed to relying on their own processesand vendors. In order to ensure they fully adopted the systems, as well as© 2010 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited.Nucleus Research is the leading provider of bottom line-focused technology research and advice. 3NucleusResearch.com
  • 4. August 2010 Document K22contributed to the business requirements of the deployment, the benefits managerhad weekly calls with these local managers. These calls were dedicated toapplication fine tuning and placed an emphasis on participative decision making.As a result, all of these managers felt that their operational success would beenhanced by the adoption, which also led to broader employee adoption.CALCULATING THE ROINucleus calculated the costs of software, personnel, and training investments overa 3-year period to quantify Morganite’s total investment in Benefitfocus.Direct benefits calculated included savings from the discontinuation of benefits toindividuals who were found to be ineligible for coverage under Morganite’s plans, aswell as avoided headcount resulting from the termination and redeployment of HRadministrators. Indirect benefits calculated included the improved productivity ofemployees and HR administrators who now spend less time on operational tasksrelated to insurance coverage. These benefits were based on the employees’average fully loaded annual cost and an estimation of the annual amount of timesaved. A correction factor was applied to take into account the fact that not alltime saved will be converted into time spent on additional work.© 2010 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited.Nucleus Research is the leading provider of bottom line-focused technology research and advice. 4NucleusResearch.com
  • 5. DETAILED FINANCIAL ANALYSISMORGANITE INDUSTRIESSUMMARYProject: BenefitfocusAnnual return on investment (ROI) 178%Payback period (years) 0.56Average annual benefit 438,418Average annual total cost of ownership 277,174ANNUAL BENEFITS Pre-start Year 1 Year 2 Year 3Direct 0 279,000 279,000 279,000Indirect 0 159,418 159,418 159,418Total Benefits Per Period 0 438,418 438,418 438,418DEPRECIATED ASSETS Pre-start Year 1 Year 2 Year 3Software 0 0 0 0Hardware 0 0 0 0Total Per Period 0 0 0 0DEPRECIATION SCHEDULE Pre-start Year 1 Year 2 Year 3Software 0 0 0 0Hardware 0 0 0 0Total Per Period 0 0 0 0EXPENSED COSTS Pre-start Year 1 Year 2 Year 3Software 100,000 240,000 240,000 240,000Hardware 0 0 0 0Consulting 0 0 0 0Personnel 10,004 0 0 0Training 1,519 0 0 0Other 0 0 0 0Total Per Period 111,522 240,000 240,000 240,000FINANCIAL ANALYSIS Pre-start Year 1 Year 2 Year 3Net cash flow before taxes (111,522) 198,418 198,418 198,418Net cash flow after taxes (55,761) 99,209 99,209 99,209Annual ROI - direct and indirect benefits 178% 178% 178%Annual ROI - direct benefits only 35% 35% 35%Net present value (NPV) (55,761) 36,099 121,155 199,910Payback (years) 0.56Average annual cost of ownership 111,522 351,522 295,761 277,1743-year IRR 169% 169%FINANCIAL ASSUMPTIONSAll government taxes 50%Discount rate 8%© 2010 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited. All calculations are based on NucleusResearchs independent analysis of the expected costs and benefits associated with the solution. NucleusResearch.com 5