Analyse the ABO Interoffice MemoStructure and Comtent: Includes 6 sections1. Create a cover page:To: Joan Marlow, Director, Human Resources DivisionFrom: Leslie Galusha, Chief Employee Benefits Department LGDate: June 15, 2009Subject: Employee Fitness and Health-Care Costs2. Reality Health-care and workers’-compensation insurance costs at ABO, Inc. the last five years:- Health-care and workers’-compensation insurance costs at ABO, Inc., have risen 100 percent over the last five years. In 2004, costs were $5,675 per employee per year; in 2009, they have reached $11,560 per employee per year. This doubling of costs mirrors a national trend, with health-care costs anticipated to continue to rise at the same rate for the next ten years. Controlling these escalating expenses will be essential. They are eating into ABO’s profit margin because the company currently pays 70 percent of the costs for employee coverage.3. Arguments and Give recommendations:- Healthy employees bring direct financial benefits to companies in the form of lower employee insurance costs, lower absenteeism rates, and reduced turnover. Regular physical exercise promotes fit, healthy people by reducing the risk of coronary heart disease, diabetes, osteoporosis, hypertension, and stress related problems. I propose that to promote regular, vigorous physical exercise for our employees, ABO implement a health-care program that focuses on employee fitness. 4. Given the Problem of Health-Care Costs- The U.S. Department of Health and Human Services recently estimated that health-care costs in the United States will triple by the year 2020. Corporate expenses for health care are rising at such a fast rate that, if unchecked, in seven years they will significantly erode corporate profits. Researchers agree that people who do not participate in a regular and vigorous exercise program incur double the health-care costsand are hospitalized 30 percent more days than people who exercise regularly. Non exercisers are also 41 percent more likely to submit medical claims over $10,000 at some point during their careers than are those who exercise regularly .- My study of Tenneco, Inc., found that the average health-care claim for unfit men was $2,006 per illness compared with an average claim of $862 for those who exercised regularly. For women, the average claim for those who were unfit was $2,535, more than double the average claim of $1,039 for women who exercised. In addition, Control Data Corporation found that each non-exerciser cost the company an extra $515 a year in health-care- These figures are further supported by data from independentstudies. A model created by the National Institutes of Health(NIH) estimates that the average white-collar company couldsave $596,000 annually in medical costs (per 1,000 employees) just by promoting wellness. NIH researchers estimated that for every $1 a firm invests in a health-care program, it saves up to $3.75 in health-care costs. Another NIH study of 667 insurance company employees showed savings of $2.65 million over a five-year period. The same study also showed a 400 percent drop in absentee rates after the company implemented a companywide fitness program. 5. Given the Possible Solutions for ABO - The benefits of regular, vigorous physical activity for employees and companies are compelling. To achieve these benefits at ABO, I propose that we choose from one of two possible options: Buildin-house fitness centers at our warehouse facilities, or offer employees several options for membership at a national fitness club. The following analysis compares6. Given the Conclusion and Recommendation- I recommend that ABO, Inc., participate in the corporate membership program at Aero Fitness Clubs, Inc., by subsidizing employee memberships. By subsidizing memberships, ABO shows its commitment to the importance of a fit workforce. Club membership allows employees at all five ABO warehouses to participate in the program. The more employees who participate, the greater the long-term savings in ABO’s health-care costs. Building and equipping fitness centers at all five warehouse sites would require an initial investment of nearly $2.5 million. These facilities would, in addition, occupy valuable floor space—on average, 4,000 square feet at each warehouse. Therefore, this option would be very costly.- Enrolling employees in the corporate program at AeroFitness would allow them to receive a one-month free trial membership. Those interested incontinuing could then join the club and pay half of the one-time membership fee of $900 and receive a 30-percent discount on the $600 yearly fee. The other half of the membership fee ($450) would be paid for by ABO. If employees leave the company, they would have the option of purchasing ABO’s share of the membership to continue at AeroFitness or selling their half of the membership to another ABO employee wishing to join Aero Fitness.- Implementing this program will help ABO, Inc., reduce its healthcare costs while building stronger employee relations by offering employees a desirable benefit. If this proposal is adopted, I have some additional thoughts about publicizing the program to encourage employee participation. I look forward to discussing the details of this proposal with you and answering any questions you may have.
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