Microsoft Does a Benefits Tech Makeover

In the past year, Microsoft had its first layoff ever, eliminating 5,800 jobs as the software giant dealt with the recession and Internet-induced technological changes that have loosened its vise-like grip on the software business.

To cut costs, the $58.4 billion company also reduced travel and eliminated contract positions.

But in its efforts to rein in spending, there’s one thing Redmond, Washington-based Microsoft hasn’t touched: employees’ health care benefits.

This year, as in years past, Microsoft paid for 100 percent of the cost of health care for approximately 55,000 U.S. employees. The company’s largess doesn’t end there. Microsoft also picks up the tab for premiums and other health care expenses for every U.S. employee’s eligible dependents, bringing the number of total lives covered close to 140,000, roughly the population of Pasadena, California, or Syracuse, New York.

But to continue that kind of benefit commitment, something had to give, as Microsoft confronted rising benefits costs, a maturing, family-starting workforce and the management of a multiplicity of health and wellness portals. Not surprisingly, Microsoft’s solution was a technological one—an online employee benefits portal. But this was a solution with a twist: Microsoft opted to buy the technology, not build it from the ground up.

First among Microsoft’s challenges was the very cost of benefits. Employers’ health care costs are rising around 10 percent a year, and some like-sized Fortune 1,000 companies have dropped all but the least expensive coverage. Microsoft’s HR executives knew that if they wanted to continue offering 100-percent-paid benefits, they had to do a better job of making workers think twice before using them unnecessarily, like rushing to the ER for every sprain, strain and kid with an ear infection.

The need for cost containment also has become more pressing as Microsoft workers have gotten older. The company’s historically young workforce is growing up, with an average age of 38. As they age, company employees are getting married, having families and using more health care, contributing to higher costs. On average, eight Microsoft babies are born every day, which helps to explain why maternity and newborn costs are typically Microsoft’s Nos. 1 and 2 health care costs, according to Julie Sheehy, U.S. health benefits director at the company.

Finally, Microsoft wanted to do a better job of weaving together employee health and wellness services and resources provided through a growing list of outside partners such as the Mayo Clinic and Medco that hadn’t been well integrated into the company’s health insurance enrollment portal.

In July 2007, with all that in mind, a team of Microsoft HR managers led by Lee Johnson, director of HR solutions delivery, was given the job of looking for ways to streamline the company’s health care benefits platform while simultaneously making employees more cost-conscious health care shoppers. Johnson and his team came up with a single portal to replace a mishmash of stand-alone systems, a site dubbed MyMicrosoftBenefits.com.

Today, employees use MyMicrosoftBenefits.com during open enrollment season to shop the health insurance plans Microsoft offers for the one with the best fit. They can also log on to check balances in their health care benefits flex account, look up old claims, compare and purchase prescription medications, check ratings for area hospitals, track a personal exercise program and read up on specific diseases and conditions.

In addition, the portal is integrated with Microsoft’s Health Vault personal medical records software program, an application employees can use to store immunization histories, doctor’s office visit notes and other health records for themselves and their families.

Microsoft could have built a health care portal itself—the company’s HR IT team had previously built systems for compensation administration and career development. But HR execs opted to devote department manpower to other projects and brought in an outside vendor to do the heavy lifting. They tapped Enwisen, a privately held Novato, California, company that provides software-as-a-service HR portals, onboarding products and other HR delivery technologies to customers such as Nissan, Hershey, American Modern Insurance Group and Yahoo.

As any software company knows, getting from concept to concrete application isn’t easy, and getting MyMicrosoftBenefits.com up and running was no exception. About a year into the project, Johnson’s team realized that some information they wanted to shift to the portal, including “tens of thousands of pages” of health care resource material that was up to 15 years old, was too buggy to be moved, according to Johnson. Even though they intended to launch in time for the open enrollment season in November 2008, they stopped work for three months to clean up the data.

At the same time Microsoft was building the portal, the company was also turning over benefits administration to Watson Wyatt Worldwide, and adding outside vendors for tuition reimbursement and other specialty services, and those wrinkles added to the project’s complexity. “We could have done a better job of it, but luckily we could lean on Enwisen for a lot of the integration,” Johnson said during a presentation on the project at the recent HR Technology Conference in Chicago.

MyMicrosoftBenefits brings enrollment, health and wellness information and information on non-health care perks such as tuition reimbursement under one electronic roof. It also has several other features employees specifically requested.

They had grumbled about having to use a separate password to log on to the old enrollment system, so the new portal works with the same password employees use to access the company intranet. Since spouses are often the health care decision makers in the family, they were given access to a certain areas of the portal that they can log on to over the Internet.

Rolled out in September 2008, the portal got its first real test during open enrollment season two months later. Although Microsoft hadn’t made significant changes to health benefits, traffic to the portal skyrocketed compared with traffic to the older system, reaching a peak of nearly166,000 unique visits during November 2008. Since then, the site has averaged about 1.5 sessions per employee per month, according to Johnson.

Sheehy, the company’s U.S. health care benefits director, won’t disclose how much Microsoft spent on the portal, or how much Microsoft has saved on benefits delivery as a result.

But according to Barbara Levin, Enwisen senior vice president of marketing and customer community, other Enwisen customers have cut claims costs significantly after creating a self-serve benefits portal. Employees make better—and cheaper—health care choices when they are armed with more information, and are also more likely to take advantage of wellness and other programs.

For example, after Enwisen built a benefits portal for American Modern Insurance Group, the 900-employee specialty insurer in Amelia, Ohio, cut its claims costs 10 percent, according to Levin. “The theory is [that] in high-deductible plans, where employees pay a higher deductible, they’ll be smarter about their health, and then [the number of] doctor visits, procedures and so on are lower, and they’ve proven this,” Levin says.

At the HR Technology Conference, Johnson said Microsoft spends “hundreds of millions” on benefits claims a year, so the portal is a big step toward getting employees to realize the financial ramifications of their individual health care choices.

Microsoft’s benefits managers hope to use the portal in 2010 to share even more benefits information with employees, as a way of driving home their message of cost consciousness. “We’re talking about doing a total rewards statement on compensation, benefits and perks associated with employment,” Johnson said.